Density Nowcasts and Model Combination: Nowcasting Euro-Area GDP Growth over the 2008–09 Recession

Gian Luigi Mazzi, James Mitchell and Gaetana Montana

Oxford Bulletin of Economics and Statistics, 2014, vol. 76, issue 2, 233-256

Abstract: type="main" xml:lang="en">

Combined density nowcasts for quarterly Euro-area GDP growth are produced based on the real-time performance of component models. Components are distinguished by their use of ‘hard’ and ‘soft’, aggregate and disaggregate, indicators. We consider the accuracy of the density nowcasts as within-quarter indicator data accumulate. We find that the relative utility of ‘soft’ indicators surged during the recession. But as this instability was hard to detect in real-time it helps, when producing density nowcasts unknowing any within-quarter ‘hard’ data, to weight the different indicators equally. On receipt of ‘hard’ data for the second month in the quarter better calibrated densities are obtained by giving a higher weight in the combination to ‘hard’ indicators.

Date: 2014
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