Forecasting World Output: The Rising Importance of Emerging Economies

45 Pages Posted: 30 Mar 2012

See all articles by Alessandro Borin

Alessandro Borin

Bank of Italy

Riccardo Cristadoro

Bank of Italy

Roberto Golinelli

University of Bologna - Department of Economics

Giuseppe Parigi

Bank of Italy

Date Written: February 23, 2012

Abstract

Assessing the global economic outlook is a fundamentally important task of international financial institutions, governments and central banks. In this paper we focus on the consequences of the rapid growth of emerging markets for monitoring and forecasting the global outlook. Our main results are that (i) the rise of the emerging countries has sharply altered the correlation of growth rates among the main economic areas; (ii) this is clearly detectable in forecasting equations as a structural break occurring in the 1990s; (iii) hence, inferences on global developments based solely on the industrialized countries are highly unreliable; (iv) the otherwise cumbersome task of monitoring many – and less studied – countries can be tackled by resorting to very simple bridge models (BM); (v) BM performance is in line with that of the most widely quoted predictions (WEO, Consensus) both before and during the recent crisis; (vi) for some emerging economies, BMs would have provided even better forecasts during the recent crisis.

Keywords: GDP forecast, emerging and Asian markets, bridge models, forecasting ability

JEL Classification: C22, C53, E37, F47

Suggested Citation

Borin, Alessandro and Cristadoro, Riccardo and Golinelli, Roberto and Parigi, Giuseppe, Forecasting World Output: The Rising Importance of Emerging Economies (February 23, 2012). Bank of Italy Temi di Discussione (Working Paper) No. 853. Available at SSRN: https://ssrn.com/abstract=2030809 or http://dx.doi.org/10.2139/ssrn.2030809

Alessandro Borin

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Riccardo Cristadoro (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Servizio Studi
00184 Roma
Italy
+39 06 4792 3341 (Phone)
+39 06 4792 3720 (Fax)

Roberto Golinelli

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 209 2638 (Phone)
+39 051 209 2664 (Fax)

Giuseppe Parigi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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