Financial nowcasts and their usefulness in macroeconomic forecasting

Knotek II, Edward S. and Zaman, Saeed,(UNSPECIFIED), Financial nowcasts and their usefulness in macroeconomic forecasting. , International Journal of Forecasting, UNSPECIFIED

[thumbnail of Financial-nowcasts-and-their-usefulness-in-mac_2019_International-Journal-of.pdf] Text
Restricted to Repository staff only

Download (1MB) | Request a copy


Financial data often contain information that is helpful for macroeconomic forecasting, while multi-step forecast accuracy benefits from incorporating good nowcasts of macroeconomic variables. This paper considers the usefulness of financial nowcasts for making conditional forecasts of macroeconomic variables with quarterly Bayesian vector autoregressions (BVARs). When nowcasting quarterly financial variables’ values, we find that taking the average of the available daily data and a daily random walk forecast to complete the quarter typically outperforms other nowcasting approaches. Using real-time data, we find gains in out-of-sample forecast accuracy from the inclusion of financial nowcasts relative to unconditional forecasts, with further gains from the incorporation of nowcasts of macroeconomic variables. Conditional forecasts from quarterly BVARs augmented with financial nowcasts rival the forecast accuracy of mixed-frequency dynamic factor models and mixed-data sampling (MIDAS) models.
Keywords : Conditional forecasting Nowcasting Bayesian VARs Mixed-frequency models Real-time data, UNSPECIFIED
Journal or Publication Title: International Journal of Forecasting
Item Type: Article
Subjects: Ekonomi Pembangunan
Depositing User: Elok Inajati
Date Deposited: 30 Dec 2019 04:51
Last Modified: 30 Dec 2019 04:51

Actions (login required)

View Item
View Item