Data Management

Green Shoots In The Euro Area. A Real Time Measure

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Executive Summary

The authors show that an extension of the Markov-switching dynamic factor models that accounts for the specificities of the day to day monitoring of economic developments such as ragged edges, mixed frequencies and data revisions is a good tool to forecast the Euro area recessions in real time. They provide examples that show the nonlinear nature of the relations between data revisions, point forecasts and forecast uncertainty. According to their empirical results, they think that the real time probabilities of recession are an appropriate statistic to capture what the press call green shoots.

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