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Real-time forecasting us GDP from small-scale factor models

Maximo Camacho () and Jaime Martinez-Martin ()

No 1425, Working Papers from Banco de España

Abstract: We show that the single-index dynamic factor model developed by Aruoba and Diebold (Am Econ Rev, 100:20-24, 2010) to construct an index of US business cycle conditions is also very useful for forecasting US GDP growth in real time. In addition, we adapt the model to include survey data and financial indicators. We find that our extension is unequivocally the preferred alternative for computing backcasts. In nowcasting and forecasting, our model is able to forecast growth as well as AD and better than several baseline alternatives. Finally, we show that our extension could also be used to infer US business cycles with great accuracy.

Keywords: real-time forecasting; economic indicators; business cycles. (search for similar items in EconPapers)
JEL-codes: C22 E27 E32 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014-10
New Economics Papers: this item is included in nep-fdg, nep-for and nep-mac
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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... /14/Fich/dt1425e.pdf First version, October 2014 (application/pdf)

Related works:
Journal Article: Real-time forecasting US GDP from small-scale factor models (2014) Downloads
Working Paper: Real-time forecasting US GDP from small-scale factor models (2012) Downloads
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