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Working Paper
The Importance of Updating: Evidence from a Brazilian Nowcasting Model
How often should we update predictions for economic activity? Gross domestic product is a quarterly variable disseminated usually a couple of months after the end of the quarter, but many other macroeconomic indicators are released with a higher frequency, and financial markets react very strongly to them. However, most of the professional forecasters, including the IMF, the OECD, and most central banks, tend to update their forecasts of economic activity only two to four times a year. The main exception is the Central Bank of Brazil which is responsible for collecting and publishing a daily ...
Working Paper
Forecasting Energy Commodity Prices: A Large Global Dataset Sparse Approach
This paper focuses on forecasting quarterly energy prices of commodities, such as oil, gas and coal, using the Global VAR dataset proposed by Mohaddes and Raissi (2018). This dataset includes a number of potentially informative quarterly macroeconomic variables for the 33 largest economies, overall accounting for more than 80% of the global GDP. To deal with the information in this large database, we apply a dynamic factor model based on a penalized maximum likelihood approach that allows us to shrink parameters to zero and to estimate sparse factor loadings. The estimated latent factors show ...
Working Paper
A Nowcasting Model for Canada: Do U.S. Variables Matter?
We propose a dynamic factor model for nowcasting the growth rate of quarterly real{{p}}Canadian gross domestic product. We show that the proposed model produces more accurate nowcasts than those produced by institutional forecasters, like the Bank of Canada, the The Organisation for Economic Co-operation and Development (OECD), and the survey collected by Bloomberg, which reflects the median forecast of market participants. We show that including U.S. data in a nowcasting model for Canada dramatically improves its predictive accuracy, mainly because of the absence of timely production data ...
Working Paper
The Factor Structure of Disagreement
We estimate a Bayesian three-dimensional dynamic factor model on the individual forecasts in the Survey of Professional Forecasters. The factors extract the most important dimensions along which disagreement comoves across variables. We interpret our results through a general semi-structural dispersed information model. The two most important factors in the data describe disagreement about aggregate supply and demand, respectively. Up until the Great Moderation, supply disagreement was dominant, while in recent decades and particularly during the Great Recession, demand disagreement was most ...