Finance and Economics Discussion Series (FEDS)
Nowcasting Turkish GDP and News Decomposition
Michele Modugno, Baris Soybilgen, and Ege Yazgan
Real gross domestic product (GDP) data in Turkey are released with a very long delay compared with other economies, between 10 and 13 weeks after the end of the reference quarter. To infer the current state of the economy, policy makers, media, and market practitioners examine data that are more timely, that are released at higher frequencies than the GDP. In this paper, we propose an econometric model that automatically allows us to read through these more current and higher-frequency data and translate them into nowcasts for the Turkish real GDP. Our model outperforms nowcasts produced by the Central Bank of Turkey, the International Monetary Fund, and the Organization for Economic Co-operation and Development. Moreover, our model allows us to quantify the importance of each variable in our dataset in nowcasting Turkish real GDP. In line with findings for other economies, we find that real variables play the most important role; however, contrary to the findings for other economies, we find that financial variables are as important as surveys.
Keywords: Developing economy, dynamic factor model, emerging market, gross domestic product, news, nowcasting
PDF: Full Paper