Nowcasting German GDP: Foreign factors, financial markets, and model averaging

Andreini, P, Hasenzagl, T, Reichlin, L, Senftleben-Konig, C and Strohsal, T (2023) Nowcasting German GDP: Foreign factors, financial markets, and model averaging. International Journal of Forecasting, 39 (1). pp. 298-313. ISSN 0169-2070

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 a foreign factor 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 in order to assess the overall performance of the model beyond forecast errors in GDP. The index is constructed as a weighted average of the nowcast errors related to each variable included in the model.

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Item Type:	Article
Subject Areas:	Economics
Date Deposited:	10 Jan 2022 20:48
Last Modified:	21 Nov 2024 02:29
URI:	https://lbsresearch.london.edu/id/eprint/2194

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