MIDAS versus mixed-frequency VAR: nowcasting GDP in the euro area

Arbeitspapier

This paper compares the mixed-data sampling (MIDAS) and mixed-frequency VAR (MF-VAR) approaches to model speci…cation in the presence of mixed-frequency data, e.g., monthly and quarterly series. MIDAS leads to parsimonious models based on exponential lag polynomials for the coe¢ cients, whereas MF-VAR does not restrict the dynamics and therefore can su¤er from the curse of dimensionality. But if the restrictions imposed by MIDAS are too stringent, the MF-VAR can perform better. Hence, it is di¢ cult to rank MIDAS and MF-VAR a priori, and their relative ranking is better evaluated empirically. In this paper, we compare their performance in a relevant case for policy making, i.e., nowcasting and forecasting quarterly GDP growth in the euro area, on a monthly basis and using a set of 20 monthly indicators. It turns out that the two approaches are more complementary than substitutes, since MF-VAR tends to perform better for longer horizons, whereas MIDAS for shorter horizons.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper Series 1 ; No. 2009,07

Classification and Topics

• Classification: Wirtschaft ; Forecasting Models; Simulation Methods ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
• Subject: nowcasting ; mixed-frequency data ; mixed-frequency VAR ; MIDAS ; Konjunkturprognose ; Prognoseverfahren ; Ökonometrisches Modell ; Vergleich ; Theorie ; Sozialprodukt ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kuzin, Vladimir N. ; Marcellino, Massimiliano ; Schumacher, Christian
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/27661
• Last update: 10.03.2025, 11:41 AM CET