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Uncertain kingdom: nowcasting GDP and its revisions

Author

Listed:
  • Anesti, Nikoleta
  • Galvao, Ana Beatriz
  • Miranda-Agrippino, Silvia
Abstract
We design a new econometric framework to nowcast macroeconomic data subject to revisions, and use it to predict UK GDP growth in real-time. To this aim, we assemble a novel dataset of monthly and quarterly indicators featuring over ten years of real-time data vintages. Successive monthly estimates of GDP growth for the same quarter are treated as correlated observables in a Dynamic Factor Model (DFM) that also includes a large number of mixed-frequency predictors, leading to the release-augmented DFM (RA-DFM). The framework allows for a simple characterisation of the stochastic process for the revisions as a function of the observables, and permits a detailed assessment of the contribution of the data flow in informing (i) forecasts of quarterly GDP growth; (ii) the evolution of forecast uncertainty; and (iii) forecasts of revisions to early released GDP data. By evaluating the real-time performance of the RA-DFM, we find that the model’s predictions have information about the latest GDP releases above and beyond that contained in the statistical office earlier estimates; predictive intervals are well-calibrated; and UK GDP growth real-time estimates are commensurate with professional nowcasters. We also provide evidence that statistical office data on production and labour markets, subject to large publication delays, account for most of the forecastability of the revisions.

Suggested Citation

  • Anesti, Nikoleta & Galvao, Ana Beatriz & Miranda-Agrippino, Silvia, 2018. "Uncertain kingdom: nowcasting GDP and its revisions," LSE Research Online Documents on Economics 90382, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:90382
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    File URL: http://eprints.lse.ac.uk/90382/
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    References listed on IDEAS

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    Cited by:

    1. Cascaldi-Garcia, Danilo & Ferreira, Thiago R.T. & Giannone, Domenico & Modugno, Michele, 2024. "Back to the present: Learning about the euro area through a now-casting model," International Journal of Forecasting, Elsevier, vol. 40(2), pages 661-686.
    2. Galvão, Ana Beatriz & Lopresto, Marta, 2020. "Real-Time Probabilistic Nowcasts Of Uk Quarterly Gdp Growth Using A Mixed-Frequency Bottom-Up Approach," National Institute Economic Review, National Institute of Economic and Social Research, vol. 254, pages 1-11, November.
    3. Byron Botha & Geordie Reid & Tim Olds & Daan Steenkamp & Rossouw van Jaarsveld, 2021. "Nowcasting South African GDP using a suite of statistical models," Working Papers 11001, South African Reserve Bank.
    4. Eiji Goto & Jan P.A.M. Jacobs & Tara M. Sinclair & Simon van Norden, 2023. "Employment reconciliation and nowcasting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(7), pages 1007-1017, November.
    5. Jack Fosten & Daniel Gutknecht, 2021. "Horizon confidence sets," Empirical Economics, Springer, vol. 61(2), pages 667-692, August.
    6. Kohns, David & Potjagailo, Galina, 2023. "Flexible Bayesian MIDAS: time‑variation, group‑shrinkage and sparsity," Bank of England working papers 1025, Bank of England.

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    More about this item

    Keywords

    nowcasting; data revisions; dynamic factor model;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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