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Bridging the information gap: small-scale nowcasting models of GDP growth for selected CESEE countries

Author

Listed:
  • Martin Feldkircher

    (Oesterreichische Nationalbank, Foreign Research Division)

  • Florian Huber

    (Vienna University of Economics and Business (WU))

  • Josef Schreiner

    (Oesterreichische Nationalbank, Economic Analysis Division)

  • Marcel Tirpák

    (European Central Bank, Convergence and Competitiveness Division)

  • Peter Tóth
  • Julia Wörz

    (Foreign Research Division, Oesterreichische Nationalbank)

Abstract
In this article, we describe short-term forecasting models of economic activity for seven countries in Central, Eastern and Southeastern Europe (CESEE) and compare their forecasting performance since the outbreak of the Great Recession. To build these models, we use four variants of bridge equations and a dynamic factor model for each country. Given the differences in availability of monthly indicators across countries and the rather short time period over which these indicators are available, we favor small-scale forecasting models. We selected monthly indicators on the basis of expert judgment, correlation analysis and Bayesian model averaging techniques. While our models generally outperform a purely time series-based forecast for all CESEE countries, there is no single technique that consistently produces the best out-of-sample forecast. To maximize forecasting accuracy, we therefore recommend selecting a country-specific modeling approach for every CESEE economy on the basis of out-of-sample forecasting performance.

Suggested Citation

  • Martin Feldkircher & Florian Huber & Josef Schreiner & Marcel Tirpák & Peter Tóth & Julia Wörz, 2015. "Bridging the information gap: small-scale nowcasting models of GDP growth for selected CESEE countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 56-75.
    • Handle: RePEc:onb:oenbfi:y:2015:i:2:b:1
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    References listed on IDEAS

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    Cited by:

    1. David Havrlant & Peter Tóth & Julia Wörz, 2016. "On the optimal number of indicators – nowcasting GDP growth in CESEE," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 54-72.
    2. Tóth, Peter, 2014. "Malý dynamický faktorový model na krátkodobé prognózovanie slovenského HDP [A Small Dynamic Factor Model for the Short-Term Forecasting of Slovak GDP]," MPRA Paper 63713, University Library of Munich, Germany.
    3. Aleksandra Riedl & Julia Wörz, 2018. "A simple approach to nowcasting GDP growth in CESEE economies," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/18, pages 56-74.

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    More about this item

    Keywords

    nowcasting; bridge equations; dynamic factor models; Bayesian model averaging; Central; Eastern and Southeastern Europe;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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