DFROG: A nowcasting model for GDP growth
Gepubliceerd: 20 november 2024
This paper presents DFROG, the “nowcasting” model employed by De Nederland- sche Bank (DNB) to generate near-term forecasts of the quarter-on-quarter growth rate of Gross Domestic Product (GDP). The core concept of DFROG is that the co- movement of a potentially large set of monthly economic indicators can be sum- marized into a few factors, which can then be used to forecast GDP growth. We compare the forecast accuracy of DFROG with several benchmark models and pro- fessional analysts, and conduct a thorough review of the model’s optimal specifica- tion.
Keywords: nowcasting; dynamic factor model
JEL codes C33; C53; E37
Working paper no. 819
Research highlights
- This paper presents the nowcasting model DFROG (Dutch Forecasting Model for Real-time Output Growth) that De Nederlandsche Bank uses for its near-term GDP growth forecasts;
- We find that model specification, the composition and transformation of the dataset of monthly series included in the model, and the estimation period matter for forecast accuracy;
- To insure against model instability the DFROG forecasts are an unweighted average of eighteen model specifications;
- We find that DFROG is a very competitive model within the class of nowcasting models, and also with respect to professional analysts;
- DFROG, and the other mechanical models considered, are unable to beat the near-term forecast of professional analysts during the highly volatile COVID-period.
819 - DFROG: A nowcasting model for GDP growth
819 - DFROG: A nowcasting model for GDP growth
Ontdek gerelateerde artikelen
DNB maakt gebruik van cookies
Om de gebruiksvriendelijkheid van onze website te optimaliseren, maken wij gebruik van cookies.
Lees meer over de cookies die wij gebruiken en de gegevens die we daarmee verzamelen in onze cookie-policy.