Forecasting Italian GDP Growth with Epidemiological Data

28 Pages Posted: 24 Jan 2022

Date Written: December 22, 2021

Abstract

The Covid-19 epidemic affected the ability of traditional forecasting models to produce reliable scenarios for the evolution of economic activity. We combine macroeconomic variables with epidemiological indicators to account for the Covid-19 shock and predict the short-term evolution of Italian GDP growth. In particular, we use a mixed-frequency dynamic factor model together with a sophisticated susceptible-infectious-recovered epidemic model featuring endogenous policy responses. First, we simulate different scenarios of economic growth depending on the course of the pandemic in Italy. Second, we evaluate the forecast performance of the model for the period August 2020-March 2021. We find that taking epidemiological indicators into consideration is important for obtaining reliable projections.

Keywords: foreign direct investment, capital controls, national security

JEL Classification: F21, F38, F52

Suggested Citation

Aprigliano, Valentina and Borin, Alessandro and Conteduca, Francesco Paolo and Emiliozzi, Simone and Flaccadoro, Marco and Marchetti, Sabina and Villa, Stefania, Forecasting Italian GDP Growth with Epidemiological Data (December 22, 2021). Bank of Italy Occasional Paper No. 664, Available at SSRN: https://ssrn.com/abstract=4016685 or http://dx.doi.org/10.2139/ssrn.4016685

Valentina Aprigliano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Borin

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Francesco Paolo Conteduca

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

HOME PAGE: http://fpconteduca.com

Simone Emiliozzi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Marco Flaccadoro

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Sabina Marchetti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Stefania Villa (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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