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Constructing a high‐frequency World Economic Gauge using a mixed‐frequency dynamic factor model

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  • Chew Lian Chua
  • Sarantis Tsiaplias
  • Ruining Zhou

Abstract

This paper uses information at the daily, monthly, and quarterly frequencies to construct a daily World Economic Gauge (WEG). We postulate a mixed‐frequency dynamic factor model to extract data observable at different frequencies in order to track the health of the global economy. We show that the WEG offers a reliable basis for tracking economic activity during key events such as COVID‐19 and the Global Financial Crisis. Moreover, the WEG is shown to contain leading information about the output growth of the OECD, G7, NAFTA, European Union, and euro areas, in addition to the output growth of 42 individual countries.

Suggested Citation

  • Chew Lian Chua & Sarantis Tsiaplias & Ruining Zhou, 2024. "Constructing a high‐frequency World Economic Gauge using a mixed‐frequency dynamic factor model," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(6), pages 2212-2227, September.
    • Handle: RePEc:wly:jforec:v:43:y:2024:i:6:p:2212-2227
    DOI: 10.1002/for.3130
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