Nowcasting and Short-Term Forecasting of Russian GDP with a Dynamic Factor Model

Alexey Porshakov, Elena Deryugina, Alexey Ponomarenko and Andrey Sinyakov ()
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Andrey Sinyakov: Bank of Russia, Russian Federation

No wps2, Bank of Russia Working Paper Series from Bank of Russia

Abstract: Real-time assessment of quarterly GDP growth rates is crucial for evaluating an economy’s current prospects given that the relevant data are normally subject to substantial delays in publication by the national statistical agencies. Large information sets of real-time indicators which could be used to approximate GDP growth rates in the quarter of interest are characterized by unbalanced data, mixed frequencies, systematic data revisions, as well as a more general curse of dimensionality problem. The latter issues could, however, be practically resolved by means of dynamic factor model-ing, which has recently been recognized as a useful tool to evaluate current economic conditions by means of higher frequency indicators. Our main results show that the performance of dynamic factor models in predicting Russian GDP dynamics appears to be superior to other common alternative specifications. At the same time, we empirically show that the arrival of new data seems to consistently improve DFM’s predictive accuracy throughout sequential nowcast vintages. We also intro-duce an analysis of nowcast evolution resulting from the gradual expansion of the dataset of explanatory variables, as well as the framework for estimating contributions of different blocks of predictors into nowcasts of Russian GDP.

Keywords: GDP nowcast; dynamic factor models; principal components; Kalman filter; nowcast evolution (search for similar items in EconPapers)
JEL-codes: C53 C82 E17 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2015-03
New Economics Papers: this item is included in nep-cis, nep-for and nep-mac
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Nowcasting and Short-Term Forecasting of Russian GDP with a Dynamic Factor Model (2016)
Working Paper: Nowcasting and short-term forecasting of Russian GDP with a dynamic factor model (2015)
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