Nowcasting German GDP

Andreini, P, Senftleben-König, C, Hasenzagl, T, Reichlin, L and Strohsal, T (2020) Nowcasting German GDP. Working Paper. CEPR Discussion Paper No. DP14323.

Abstract

This paper develops a nowcasting model for the German economy. The model outperforms a number of alternatives and produces forecasts not only for GDP but also for other key variables. We show that the inclusion of foreign variables improves the model's performance, while financial variables do not. Additionally, a comprehensive model averaging exercise reveals that factor extraction in a single model delivers slightly better results than averaging across models. Finally, we estimate a "news" index for the German economy constructed as a weighted average of the nowcast errors related to each variable included in the model.