Description

This paper describes recent work to strengthen nowcasting capacity at the IMF's European department. It motivates and compiles datasets of standard and nontraditional variables, such as Google search and air quality. It applies standard dynamic factor models (DFMs) and several machine learning (ML) algorithms to nowcast GDP growth across a heterogenous group of European economies during normal and crisis times. Most of our methods significantly outperform the AR(1) benchmark model. Our DFMs tend to perform better during normal times while many of the ML methods we used performed strongly at identifying turning points. Our approach is easily applicable to other countries, subject to data availability.

More publications in this series: Working Papers

More publications by: Jean-Francois Dauphin ; Kamil Dybczak ; Morgan Maneely ; Marzie Taheri Sanjani ; Nujin Suphaphiphat ; Yifei Wang ; Hanqi Zhang