MIDAS and bridge equations

Arbeitspapier

This paper compares two single-equation approaches from the recent nowcast literature: Mixed-data sampling (MIDAS) regressions and bridge equations. Both approach are used to nowcast a low-frequency variable such as quarterly GDP growth by higher-frequency business cycle indicators. Three differences between the approaches are discussed: 1) MIDAS is a direct multi-step nowcasting tool, whereas bridge equations are based on iterated forecasts; 2) MIDAS equations employ empirical weighting of high-frequency predictor observations with functional lag polynomials, whereas the weights of indicator observations in bridge equations are partly fixed stemming from time aggregation. 3) MIDAS equations can consider current-quarter leads of high-frequency indicators in the regression, whereas bridge equations typically do not. However, the conditioning set for nowcasting includes the most recent indicator observations in both approaches. To discuss the differences between the approaches in isolation, intermediate specifications between MIDAS and bridge equations are provided. The alternative models are compared in an empirical application to nowcasting GDP growth in the Euro area given a large set of business cycle indicators.

Object Details

• ISBN: 978-3-95729-067-0
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bundesbank Discussion Paper ; No. 26/2014

Classification and Topics

• Classification: Wirtschaft ; Model Construction and Estimation ; Forecasting Models; Simulation Methods ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
• Subject: mixed-data sampling (MIDAS) ; bridge equations ; GDP nowcasting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schumacher, Christian
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/104623
• Last update: 10.03.2025, 11:41 AM CET