Nowcasting GDP with a pool of factor models and a fast estimation algorithm
International Journal of Forecasting ; 2022.
Article in English | ScienceDirect | ID: covidwho-1996227
ABSTRACTWe propose a novel mixed-frequency dynamic factor model with time-varying parameters and stochastic volatility for macroeconomic nowcasting and develop a fast estimation algorithm. This enables us to generate forecast densities based on a large space of factor models. We apply our framework to nowcast US GDP growth in real time. Our results reveal that stochastic volatility seems to improve the accuracy of point forecasts the most, compared to the constant-parameter factor model. These gains are most prominent during unstable periods such as the Covid-19 pandemic. Finally, we highlight indicators driving the US GDP growth forecasts and associated downside risks in real time.
Full text: Available Collection: Databases of international organizations Database: ScienceDirect Type of study: Prognostic study Language: English Journal: International Journal of Forecasting Year: 2022 Document Type: Article