Finance and Economics Discussion Series (FEDS)

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July 2018

A Nowcasting Model for the Growth Rate of Real GDP of Ecuador: Implementing a Time-Varying Intercept

Manuel P. Gonzalez-Astudillo and Daniel Baquero

Abstract:

This paper proposes a model to nowcast the annual growth rate of real GDP for Ecuador. The specification combines monthly information of 28 macroeconomic variables with quarterly information of real GDP in a mixed-frequency approach. Additionally, our setup includes a time-varying mean coefficient on the annual growth rate of real GDP to allow the model to incorporate prolonged periods of low growth, such as those experienced during secular stagnation episodes. The model produces reasonably good nowcasts of real GDP growth in pseudo out-of-sample exercises and is marginally more precise than a simple ARMA model.
Accessible materials (.zip)

Keywords: Ecuador, Nowcasting model, secular stagnation, time-varying coefficients

DOI: https://doi.org/10.17016/FEDS.2018.044

PDF: Full Paper

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Last Update: January 09, 2020