The importance of updating: evidence from a Brazilian nowcasting model

Daniela Bragoli, Luca Metelli, Michele Modugno

Risultato della ricerca: Contributo in rivistaArticolo in rivista

14 Citazioni (Scopus)

Abstract

How often should we update predictions for economic activity? Gross domestic product is a quarterly variable disseminated usually a couple of months after the end of the quarter, but many other macroeconomic indicators are released with a higher frequency, and financial markets react very strongly to them. However, most of the professional forecasters, including the IMF, the OECD, and most central banks, tend to update their forecasts of economic activity only two to four times a year. The Central Bank of Brazil, not only disseminates its official forecasts every quarter as other central banks, but also collects and publishes the results of professional forecasters’ survey data at a daily frequency. The aim of this article is to evaluate the forecasting performance of the Central Bank of Brazil Survey and to compare it with the mechanical forecasts based on state-of-the-art nowcasting techniques. Results indicate that both model and market participant predictions are well behaved, i.e. as more information becomes available their accuracy and correlation with the actual realization increases. In terms of performance the model seems to be slightly better than the institutional forecasts in the nowcast and backcast.
Lingua originaleEnglish
pagine (da-a)5-22
Numero di pagine18
RivistaOECD Journal: Journal of Business Cycle Measurement and Analysis
Stato di pubblicazionePubblicato - 2015

Keywords

  • Dynamic Factor Model
  • Nowcasting
  • Updating

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