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Real-time Nowcasting Of GDP: Factor Model Versus Professional Forecasters

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Executive Summary

This paper performs a fully real-time nowcasting (forecasting) exercise of US real Gross Domestic Product (GDP) growth using Giannone, Reichlin and Small (2008) factor model framework which enables one to handle unbalanced datasets as available in real-time. To this end, the authors have constructed a novel real-time database of vintages from October 2000 to June 2010 for a rich panel of US variables, and can hence reproduce, for any given day in that range, the exact information that was available to a real-time forecaster. They track the daily evolution throughout the current and next quarter of the model nowcasting performance.

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