Nowcasting Canadian GDP with Density Combinations
Tony Chernis and
No 2022-12, Discussion Papers from Bank of Canada
Assessing the state of the economy in real time is critical for policy-making, and understanding the risks to those assessments is equally important. Policy-makers are typically provided with point forecasts that contain insufficient information about risks. In contrast, predictive densities estimate the entire range of possible outcomes. This provides a method for quantifying not only the current state of the economy but also the degree of uncertainty, the tail risks and the overall balance of risks around that state. Accordingly, this paper extends the framework of Chernis and Sekkel (2018) to produce density nowcasts for Canadian real GDP growth. We compare several methods of combining predictive densities from 98 models representing four popular classes of nowcasting models. The performance of these combinations is then assessed in both real-time and pseudo real-time out-of-sample exercises, with the limited sample real-time simulations reinforcing the importance of data revisions for nowcasting. We demonstrate that the combined densities are reliable and accurate tools for assessing the state of the economy and risks to the outlook. We highlight in particular risks at the start of the COVID-19 pandemic.
Keywords: Econometric; and; statistical; methods (search for similar items in EconPapers)
JEL-codes: C C53 E E3 E7 (search for similar items in EconPapers)
Pages: 58 pages
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.bankofcanada.ca/2022/05/staff-discussion-paper-2022-12/ Abstract (text/html)
https://www.bankofcanada.ca/wp-content/uploads/2022/05/sdp2022-12.pdf Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bca:bocadp:22-12
Access Statistics for this paper
More papers in Discussion Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().