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Title:Real-time forecasting of GDP based on a large factor model with monthly and quarterly data PDF Logo
Authors:Schumacher, Christian
Breitung, Jörg
Issue Date:2006
Series/Report no.:Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2006,33
Abstract:This paper discusses a factor model for estimating monthly GDP using a large number of monthly and quarterly time series in real-time. To take into account the different periodicities of the data and missing observations at the end of the sample, the factors are estimated by applying an EM algorithm combined with a principal components estimator. We discuss the in-sample properties of the estimator in real-time environments and methods for out-of-sample forecasting. As an empirical application, we estimate monthly German GDP in real-time, discuss the nowcast and forecast accuracy of the model and the role of revisions. Furthermore, we assess the contribution of timely monthly data to the forecast performance.
Subjects:monthly GDP
EM algorithm
principal components
factor models
JEL:E37
C53
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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