Forecasting and nowcasting real GDP: comparing statistical models and subjective forecasts
Published in International Journal of Forecasting, 2016
We conduct a systematic comparison of the short-term forecasting abilities of twelve statistical models and professional analysts in a pseudo-real-time setting, using a large set of monthly indicators. Our analysis covers the euro area and its five largest countries over the years 1996–2011. We find summarizing the available monthly information in a few factors to be a more promising forecasting strategy than averaging a large number of single-indicator-based forecasts. Moreover, it is important to make use of all available monthly observations. The dynamic factor model is the best model overall, particularly for nowcasting and backcasting, due to its ability to incorporate more information (factors). Judgmental forecasts by professional analysts often embody valuable information that could be used to enhance the forecasts derived from purely mechanical procedures.
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Recommended citation: Jansen, W.J.J, Jin, X and J.M. de Winter (2016), Forecasting and nowcasting real GDP: Comparing statistical models and subjective forecast International Journal of Forecasting 32(2), 411-436.