Nowcasting economic activity in a small open CESEE economy using mixed frequency data

Jan Radovan () and Igor Masten ()
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Jan Radovan: Banka Slovenije
Igor Masten: University of Ljubljana

Empirica, 2025, vol. 52, issue 4, No 4, 776 pages

Abstract: Abstract This paper compares advanced nowcasting methods within the data context typical for small open CESEE economies, characterised by a limited set of mixed frequency and ragged edge domestic and international high frequency indicators. In nowcasting Slovenian real GDP growth, we evaluate bridge equation models, MIDAS models, MF-VAR models, the DFM, and the MF-3PRF. We also explore the benefits of model combinations, indicator preselection, and the role of news within the DFM. We find that factor models, particularly the DFM, perform best in this setting. Combining DFM and MF-3PRF nowcasts proves effective in periods of moderate volatility in real GDP growth. No model strongly favours a large scale information set, while using a smaller set shows greater variability. Within the DFM, news from both international environment related indicators and domestic hard data shows considerable importance for nowcasting in small open economies. Expanding the evaluation sample to include Covid-19 data further reinforces the DFM’s dominance, while the MF-3PRF’s performance declines. During this period, the relative importance of news from certain indicator categories increases compared to the original evaluation sample.

Keywords: GDP nowcasting; Small open economy; CESEE countries; Mixed frequency data; Factor models; Thick modelling (search for similar items in EconPapers)
JEL-codes: C32 C38 C52 C53 C55 E37 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10663-025-09656-0

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