Nowcasting German GDP: A Comparison of Bridge and Factor Models

27 Pages Posted: 18 Oct 2012

See all articles by Pamfili M. Antipa

Pamfili M. Antipa

Banque de France

Barhoumi Karim

Banque de France - Economic Study and Research Division

Véronique Brunhes-Lesage

Banque de France

Olivier Darné

University of Nantes - Faculty of Business and Economics

Date Written: October 2012

Abstract

Governments and central banks need to have an accurate and timely assessment of Gross Domestic Product's (GDP) growth rate for the current quarter, as this is essential for providing a reliable and early analysis of the current economic situation. This paper presents a series of models conceived to forecast the current German GDP's quarterly growth rate. These models are designed to be used on a monthly basis by integrating monthly economic information through bridge models, thus allowing for the economic interpretation of the data. We do also forecast German GDP by dynamic factor models. The combination of these two approaches allows selecting economically relevant explanatory variables among a large data set of hard and soft data. In addition, a rolling forecast study is carried out to assess the forecasting performance of the estimated models. To this end, publication lags are taken into account in order to run pseudo out-of-sample forecasts. We show that it is possible to get reasonably good estimates of current quarterly GDP growth in anticipation of the official release, especially from bridge models.

Keywords: GDP forecasting, bridge models, factor models, threshold auto-regression, bounce-back effects, business cycles, inventory investment

JEL Classification: C52, C53, E20

Suggested Citation

Antipa, Pamfili M. and karim, barhoumi and Brunhes-Lesage, Véronique and Darné, Olivier, Nowcasting German GDP: A Comparison of Bridge and Factor Models (October 2012). Banque de France Working Paper No. 401, Available at SSRN: https://ssrn.com/abstract=2163431 or http://dx.doi.org/10.2139/ssrn.2163431

Pamfili M. Antipa (Contact Author)

Banque de France ( email )

Paris
France

Barhoumi Karim

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE

Véronique Brunhes-Lesage

Banque de France ( email )

Paris
France

Olivier Darné

University of Nantes - Faculty of Business and Economics ( email )

Nantes
France

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