10.6084/m9.figshare.2377207.v2
Knut Are Aastveit
Knut
Are Aastveit
Francesco Ravazzolo
Francesco
Ravazzolo
Herman K. van Dijk
Herman
K. van Dijk
Combined Density Nowcasting in an Uncertain Economic Environment
Taylor & Francis Group
2016
Density forecast combination
Survey forecast
Bayesian filtering
Sequential Monte Carlo Nowcasting
Real-time data
2016-01-07 21:56:04
Dataset
https://tandf.figshare.com/articles/dataset/Combined_Density_Nowcasting_in_an_Uncertain_Economic_Environment/2377207
<p>We introduce a combined density nowcasting (CDN) approach to dynamic factor models (DFM) that in a coherent way accounts for time-varying uncertainty of several model and data features to provide more accurate and complete density nowcasts. The combination weights are latent random variables that depend on past nowcasting performance and other learning mechanisms. The combined density scheme is incorporated in a Bayesian sequential Monte Carlo method which rebalances the set of nowcasted densities in each period using updated information on the time-varying weights. Experiments with simulated data show that CDN works particularly well in a situation of early data releases with relatively large data uncertainty and model incompleteness. Empirical results, based on U.S. real-time data of 120 monthly variables, indicate that CDN gives more accurate density nowcasts of U.S. GDP growth than a model selection strategy and other combination strategies throughout the quarter with relatively large gains for the two first months of the quarter. CDN also provides informative signals on model incompleteness during recent recessions. Focusing on the tails, CDN delivers probabilities of negative growth, that provide good signals for calling recessions and ending economic slumps in real time.</p>