A note on the predictive power of survey data in nowcasting euro area GDP
No 10/2018, Discussion Papers from Deutsche Bundesbank
This paper investigates the trade-off between timeliness and quality in nowcasting practices. This trade-off arises when the frequency of the variable to be nowcast, such as GDP, is quarterly, while that of the underlying panel data is monthly; and the latter contains both survey and macroeconomic data. These two categories of data have different properties regarding timeliness and quality: the survey data are timely available (but might possess less predictive power), while the macroeconomic data possess more predictive power (but are not timely available because of their publication lags). In our empirical analysis, we use a modified dynamic factor model which takes three refinements for the standard dynamic factor model of Stock and Watson (2002) into account, namely mixed frequency, pre-selections and co-integration among the economic variables. Our main finding from a historical nowcasting simulation based on euro area GDP is that the predictive power of the survey data depends on the economic circumstances, namely, that survey data are more useful in tranquil times, and less so in times of turmoil.
Keywords: nowcasting; dynamic factor model; mixed frequency; pre-selections; co-integration; survey data; trade-off between timeliness and quality; turmoil and tranquility (search for similar items in EconPapers)
JEL-codes: C22 C38 C53 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-eec, nep-knm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
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:zbw:bubdps:102018
Access Statistics for this paper
More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().