Survey Data as Coincident or Leading Indicators

Transcription

1 Ministry of Economy and Finance Department of the Treasury Working Papers N 3 - May 2009 ISSN X Survey Data as Coincident or Leading Indicators Cecilia Frale, Massimiliano Marcellino, Gian Luigi Mazzi and Tommaso Proietti

2 . Working Papers The working paper series is aimed at promoting circulation and dissemination of working papers produced in the Department of the Treasury (DT) of the Italian Ministry of Economy and Finance (MEF) or presented by external economists on the occasion of seminars organised by MEF on topics of institutional interest of DT, with the aim of stimulating comments and suggestions. The views expressed in the working papers are those of the authors and do not necessarily reflect those of MEF and DT. Copyright: 2009, Cecilia Frale, Massimiliano Marcellino, Gian Luigi Mazzi and Tommaso Proietti. The document can be downloaded from the Website and freely used, providing that its source and authors are quoted. Editorial Board: Lorenzo Codogno, Mauro Marè, Libero Monteforte, Francesco Nucci Organisational coordination: Marina Sabatini

3 Survey Data as Coincident or Leading Indicators (1) Cecilia Frale (*), Massimiliano Marcellino(**), Gian Luigi Mazzi(***) and Tommaso Proietti(****) Abstract In this paper we propose a monthly measure for the euro area Gross Domestic Product (GDP) based on a small scale factor model for mixed frequency data, featuring two factors: the first is driven by hard data, whereas the second captures the contribution of survey variables as coincident indicators. Within this framework we evaluate both the in-sample contribution of the second survey-based factor, and the short term forecasting performance of the model in a pseudo-real time experiment. We find that the survey-based factor plays a significant role for two components of GDP: Industrial Value Added and Exports. Moreover, the two factor model outperforms in terms of out of sample forecasting accuracy the traditional autoregressive distributed lags (ADL) specifications and the single factor model, with few exceptions for Exports and in growth rates. JEL Classification: E32,E37,C53. Keywords: Survey data, Forecasting, Temporal Disaggregation, Dynamic factor modes, Kalman Filter and smoother. (*) Corresponding Author: Dr.ssa Cecilia Frale, Ministry of the Economy and Finance, Via XX Settembre, 97, Roma, Italy, cecilia.frale@tesoro.it. (**) Prof. Massimiliano Marcellino, European University Institute, Villa San Paolo, Via della Piazzuola 43,50133 Firenze, Italy, Massimiliano.Marcellino@EUI.eu (***) Dr. Gian Luigi Mazzi, Eurostat-European Commission, 5 Rue Alphonse Weicker, L-2721 Luxembourg, Gianluigi.Mazzi@ec.europa.eu (****) Prof. Tommaso Proietti, University of Rome Tor Vergata, Dipartimento S.E.F. e ME.Q. Via Columbia, Roma, Italy, tommaso.proietti@uniroma2.it (1)We are grateful to participants in the 5th Eurostat Colloquium on Modern Tools for Business Cycle Analysis for helpful comments and conversations. 3

4 CONTENTS 1 INTRODUCTION THE DINAMIC SURVEY- BASED FACTOR MODEL SURVEY DATA IN A FACTOR MODEL STATE SPACE REPRESENTATION OF THE MODEL ESTIMATIONS RESULTS INDUSTRY EXPORTS COMPARATIVE FORECASTING PERFORMANCE REVISIONS AND CONTRIBUTION TO THE ESTIMATION CONCLUSIONS AND DIRECTION FOR FUTURE RESEARCH REFERENCES FIGURES Fig. 1 Monthly Indicators and Quarterly value added : Eurozone12, Fig. 2 Survey coincident index, monthly disaggregated estimated and Innovations for industry and exports: Eurozone12, 1995M1-2008M5 31 Fig.3 Estimated Monthly GDP: FMMP and FMMP survey-based 32 4

5 1 INTRODUCTION 5

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7 2 THE DINAMIC SURVEY- BASED FACTOR MODEL 2.1 Survey Data in a Factor Model 7

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9 2.2 State Space Representation of the Model 9

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12 3 ESTIMATION RESULTS 12

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14 3.1 Industry 14

15 3.2 Exports 15

16 4 COMPARATIVE FORECASTING PERFORMANCE 16

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18 5 REVISIONS AND CONTRIBUTION TO THE ESTIMATION 18

19 6 CONCLUSIONS AND DIRECTION FOR FUTURE RESEARCH 19

20 REFERENCES 20

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33 Ministry of Economy and Finance Department of the Treasury Directorate I: Economic and Financial Analysis Address: Via XX Settembre, Rome Websites: dt.segreteria.direzione1@tesoro.it Telephone: Fax: