Back to the present: Learning about the euro area through a now-casting model

We build a multi-country model for simultaneously nowcasting economic conditions in the euro area and its three largest member countries—Germany, France, and Italy. The model formalizes how market participants and policymakers monitor in real time both euro-area and country-specific market-moving indicators. The out-of-sample evaluation corroborates the usefulness of a multi-country approach to monitor the euro area. Indeed, the model provides accurate real-time predictions of economic conditions both on average and in the past three recessions, while finding that soft data are timely and intrinsically informative.