The role of indicator selection in nowcasting euro-area GDP in pseudo-real time

Alessandro Girardi, Roberto Golinelli and Carmine Pappalardo
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Carmine Pappalardo: Macroeconomic Analysis Department

Empirical Economics, 2017, vol. 53, issue 1, No 6, 79-99

Abstract: Abstract Building on the literature on regularization and dimension reduction methods, the paper presents a quarterly forecasting model for euro-area GDP. The pseudo-real-time nature of the information set is accounted for as the pattern of publication lags is explicitly considered. Forecast evaluation exercises show that predictions obtained through various dimension reduction methods outperform both the benchmark AR and the diffusion index model without preselected indicators. Moreover, forecast combination significantly reduces forecast error.

Keywords: Euro-area GDP forecasts; Bridge and factor models; Indicators’ selection and prescreening; Forecasting ability (search for similar items in EconPapers)
JEL-codes: C22 C53 E37 F47 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (12)

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Working Paper: The Role of Indicator Selection in Nowcasting Euro Area GDP in Pseudo Real Time (2014)
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DOI: 10.1007/s00181-016-1151-z

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