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A bottom-up approach for forecasting GDP in a data-rich environment

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  • Francisco Dias
  • Maximiano Pinheiro
  • António Rua

Abstract

In an increasingly data-rich environment, the use of factor models for forecasting purposes has gained prominence in the literature and among practitioners. Herein, we assess the forecasting behaviour of factor models to predict several GDP components and investigate the performance of a bottom-up approach to forecast GDP growth in Portugal, which was one of the hardest hit economies during the latest economic and financial crisis. We find supporting evidence of the usefulness of factor models and noteworthy forecasting gains when conducting a bottom-approach drawing on the main aggregates of GDP.

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  • Francisco Dias & Maximiano Pinheiro & António Rua, 2018. "A bottom-up approach for forecasting GDP in a data-rich environment," Applied Economics Letters, Taylor & Francis Journals, vol. 25(10), pages 718-723, June.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:10:p:718-723
    DOI: 10.1080/13504851.2017.1361000
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    4. António Rua & Nuno Lourenço & Francisco Dias, 2018. "Forecasting exports with targeted predictors," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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