TY - JOUR
T1 - Nowcasting GDP using machine-learning algorithms: A real-time assessment
AU - Richardson, Adam
AU - van Florenstein Mulder, Thomas
AU - Vehbi, Tugrul
PY - 2021
Y1 - 2021
N2 - Can machine-learning algorithms help central banks understand the current state of the economy? Our results say yes! We contribute to the emerging literature on forecasting macroeconomic variables using machine-learning algorithms by testing the nowcast performance of common algorithms in a full 'real-time' setting-that is, with real-time vintages of New Zealand GDP growth (our target variable) and real-time vintages of around 600 predictors. Our results show that machine-learning algorithms are able to significantly improve over a simple autoregressive benchmark and a dynamic factor model. We also show that machine-learning algorithms have the potential to add value to, and in one case improve on, the official forecasts of the Reserve Bank of New Zealand. (C) 2020 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.
AB - Can machine-learning algorithms help central banks understand the current state of the economy? Our results say yes! We contribute to the emerging literature on forecasting macroeconomic variables using machine-learning algorithms by testing the nowcast performance of common algorithms in a full 'real-time' setting-that is, with real-time vintages of New Zealand GDP growth (our target variable) and real-time vintages of around 600 predictors. Our results show that machine-learning algorithms are able to significantly improve over a simple autoregressive benchmark and a dynamic factor model. We also show that machine-learning algorithms have the potential to add value to, and in one case improve on, the official forecasts of the Reserve Bank of New Zealand. (C) 2020 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.
U2 - 10.1016/j.ijforecast.2020.10.005
DO - 10.1016/j.ijforecast.2020.10.005
M3 - Article
SN - 0169-2070
VL - 37
SP - 941
EP - 948
JO - International Journal of Forecasting
JF - International Journal of Forecasting
IS - 2
ER -