Evaluation of Mixed Frequency Approaches for Tracking Near-Term Economic Developments in North Macedonia

Ramadani Gani (), Petrovska Magdalena () and Bucevska Vesna ()
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Ramadani Gani: Senior Advisor Monetary Policy and Research Department, National Bank of the Republic of North Macedonia
Petrovska Magdalena: Senior Advisor Monetary Policy and Research Department, National Bank of the Republic of North Macedonia
Bucevska Vesna: PhD Full professor of Econometrics and Financial Econometrics Faculty of Economics-Skopje, Ss. Cyril and Methodius University

South East European Journal of Economics and Business, 2021, vol. 16, issue 2, 43-52

Abstract: Aggregate demand forecasting, also known as nowcasting when it applies to current quarter assessment, is of notable interest to policy makers. This paper concentrates on the empirical methods dealing with mixed-frequency data. In particular, it focuses on the MIDAS approach and its later extension, the Bayesian MFVAR. The two strategies are evaluated in terms of their accuracy to nowcast Macedonian GDP growth, using same monthly frequency data set. The results of this study indicate that the MIDAS regressions demonstrate comparable forecasting performance to that of MF-VAR model. Moreover, it is interesting to note that the two approaches are reciprocal, since in general, their combined forecast demonstrates clear superiority in predicting business cycle turning points. Additionally, the MF-VAR model showed higher precision in times of increased uncertainty.

Keywords: MF-VAR; Bayesian estimation; MIDAS; forecast pooling; forecast evaluation (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:16:y:2021:i:2:p:43-52:n:9

DOI: 10.2478/jeb-2021-0013

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