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A nowcasting model for Ecuador: Implementing a time-varying mean output growth |
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| Institution: | 1. Board of Governors of the Federal Reserve System, Washington, D.C., USA;2. Corporación de Estudios para el Desarrollo (CORDES), Quito, Ecuador;1. South African Reserve Bank and Department of Economics, University of Stellenbosch, Stellenbosch 7602, South Africa;2. Department of Economics, University of Stellenbosch, Stellenbosch 7602, South Africa;1. National Bank of Slovakia, Imricha Karvasa, 1813 25 Bratislava, Slovakia;2. Oesterreichische Nationalbank, Otto-Wagner-Platz, 3,1090 Vienna, Austria;1. Bank of England and CEPR, United Kingdom;2. Goldman Sachs International, United Kingdom;3. Bank of England and CfM, United Kingdom;4. Bank of England, United Kingdom |
| Abstract: | We propose a model to nowcast the annual growth rate of real GDP for Ecuador, whose economy lacks timely macroeconomic information for some key variables and has gone through unstable periods due to its dependence on oil exports. Our specification combines monthly information for 30 macroeconomic and financial variables with quarterly information for real GDP in a mixed-frequency approach. Our setup includes a time-varying coefficient on the mean annual growth rate of output to allow the model to incorporate prolonged periods of low or high growth. The model produces more accurate nowcasts of real output growth in pseudo out-of-sample exercises than a nowcasting model that assumes a constant mean real GDP growth rate. We also conduct sensitivity analyses on our nowcasting model within the time-varying mean setup and find that including financial variables can be detrimental to the performance of the proposed model. |
| Keywords: | Nowcasting model Time-varying coefficients Ecuador Secular stagnation C33 C53 E37 |
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