Tracking World Trade and GDP in Real Time
46 Pages Posted: 16 Jul 2013
Date Written: July 12, 2013
This paper proposes a simple procedure to obtain monthly assessments of short-run perspectives for quarterly world GDP and trade. It combines emerging and advanced countries’ high frequency information to explain quarterly national accounts variables through bridge models. The union of all bridge equations leads to our world bridge model (WBM). The WBM econometric approach is new for two reasons: its equations combine traditional short-run bridging with theoretical level-relationships; it is the first time that forecasts of world GDP and trade are computed for advanced and emerging countries on the basis of a real-time database of 7,000 time series. Although the performance of the equations that are automatically searched for should be taken as a lower bound, results show a better WBM forecasting ability than the benchmark case and confirm the usefulness of combining WBM real-time forecasts with preliminary releases to improve the prediction of world trade. Finally, we show that the (unrealistic) use of revised data leads to a systematic overstatement of model forecasting performance.
Keywords: world trade and GDP forecasts, augmented bridge models, real-time data, forecasting ability
JEL Classification: C53, C22, E37, F47
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