Forecasting short-term real GDP growth in the euro area and Japan using unrestricted MIDAS regressions

Arbeitspapier

In this paper, the authors develop a new tool to improve the short-term forecasting of real GDP growth in the euro area and Japan. This new tool, which uses unrestricted mixed-data sampling (U-MIDAS) regressions, allows an evaluation of the usefulness of a wide range of indicators in predicting short-term real GDP growth. In line with previous Bank studies, the results suggest that the purchasing managers' index (PMI) is among the best-performing indicators to forecast real GDP growth in the euro area, while consumption indicators and business surveys (the PMI and the Economy Watchers Survey) have the most predictive power for Japan. Moreover, the results indicate that combining the predictions from a number of indicators improves forecast accuracy and can be an effective way to mitigate the volatility associated with monthly indicators. Overall, our preferred U-MIDAS model specification performs well relative to various benchmark models and forecasters.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Canada Discussion Paper ; No. 2014-3

Classification and Topics

• Classification: Wirtschaft ; Econometric Modeling: General ; Forecasting Models; Simulation Methods ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Money and Interest Rates: Forecasting and Simulation: Models and Applications
• Subject: Econometric and statistical methods ; International topics ; Méthodes économétriques et statistiques ; Questions internationale

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Leboeuf, Maxime ; Morel, Louis
• Event: Veröffentlichung
• (who): Bank of Canada
• (where): Ottawa
• (when): 2014

Further information

• DOI: doi:10.34989/sdp-2014-3
• Handle: http://hdl.handle.net/10419/129676
• Last update: 10.03.2025, 11:45 AM CET