The Euro‐Sting Revisited: The Usefulness of Financial Indicators to Obtain Euro Area GDP Forecasts. (24th January 2014)

• Record Type: Journal Article
• Authors: Camacho, Maximo; Garcia‐Serrador, Agustin
• Is Part Of: Journal of forecasting. Volume 33:Number 3(2014:Apr.)
• Page Start: 186
• Page End: 197
• Publication Date: 2014-01-24
• Subjects: Forecasting -- Periodicals; Forecasting -- Mathematical models -- Periodicals; 003.2
• DOI: 10.1002/for.2284
• Languages: English
• ISSNs: 0277-6693

Abstract

<abstract abstract-type="main"> <title>ABSTRACT</title> <p>This paper uses an extension of the Euro‐Sting single‐index dynamic factor model to construct short‐term forecasts of quarterly GDP growth for the euro area by accounting for financial variables as leading indicators. From a simulated real‐time exercise, the model is used to investigate the forecasting accuracy across the different phases of the business cycle. Our extension is also used to evaluate the relative forecasting ability of the two most reliable business cycle surveys for the euro area: the PMI and the ESI. We show that the latter produces more accurate GDP forecasts than the former. Finally, the proposed model is also characterized by its great ability to capture the European business cycle, as well as the probabilities of expansion and/or contraction periods. Copyright © 2014 John Wiley &amp; Sons, Ltd.</p> </abstract>