Nowcasting Business Cycles: A Bayesian Approach to Dynamic Heterogeneous Factor Models

Antonello D’Agostino, Domenico Giannone, Michele Lenza and Michele Modugno
Authors registered in the RePEc Author Service: Antonello D'Agostino

A chapter in Dynamic Factor Models, 2016, vol. 35, pp 569-594 from Emerald Group Publishing Limited

Abstract: We develop a framework for measuring and monitoring business cycles in real time. Following a long tradition in macroeconometrics, inference is based on a variety of indicators of economic activity, treated as imperfect measures of an underlying index of business cycle conditions. We extend existing approaches by permitting for heterogenous lead–lag patterns of the various indicators along the business cycles. The framework is well suited for high-frequency monitoring of current economic conditions in real time – nowcasting – since inference can be conducted in the presence of mixed frequency data and irregular patterns of data availability. Our assessment of the underlying index of business cycle conditions is accurate and more timely than popular alternatives, including the Chicago Fed National Activity Index (CFNAI). A formal real-time forecasting evaluation shows that the framework produces well-calibrated probability nowcasts that resemble the consensus assessment of the Survey of Professional Forecasters.

Keywords: Current economic conditions; dynamic factor models; dynamic heterogeneity; business cycles; real time; nowcasting; C11; C32; C38; E32; E38 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... 1-905320150000035014
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
Working Paper: Nowcasting Business Cycles: a Bayesian Approach to Dynamic Heterogeneous Factor Models (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-905320150000035014

DOI: 10.1108/S0731-905320150000035014

Access Statistics for this chapter

More chapters in Advances in Econometrics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().