Real-time nowcasting with a Bayesian mixed frequency model with stochastic volatility

Andrea Carriero, Todd Clark and Massimiliano Marcellino

No 1227, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: This paper develops a method for producing current-quarter forecasts of GDP growth with a (possibly large) range of available within-the-quarter monthly observations of economic indicators, such as employment and industrial production, and financial indicators, such as stock prices and interest rates. In light of existing evidence of time variation in the variances of shocks to GDP, we consider versions of the model with both constant variances and stochastic volatility. We also evaluate models with either constant or time-varying regression coefficients. We use Bayesian methods to estimate the model, in order to facilitate providing shrinkage on the (possibly large) set of model parameters and conveniently generate predictive densities. We provide results on the accuracy of nowcasts of real-time GDP growth in the U.S. from 1985 through 2011. In terms of point forecasts, our proposal is comparable to alternative econometric methods and survey forecasts. In addition, it provides reliable density forecasts, for which the stochastic volatility specification is quite useful, while parameter time-variation does not seem to matter.

Keywords: Bayesian; statistical; decision; theory (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.26509/frbc-wp-201227 Persistent link
https://www.clevelandfed.org/-/media/project/cleve ... c-volatility-pdf.pdf Full text (application/pdf)

Related works:
Journal Article: Realtime nowcasting with a Bayesian mixed frequency model with stochastic volatility (2015)
Working Paper: Real-Time Nowcasting with a Bayesian Mixed Frequency Model with Stochastic Volatility (2013)
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:fip:fedcwp:1227

Ordering information: This working paper can be ordered from

DOI: 10.26509/frbc-wp-201227

Access Statistics for this paper

More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().