March 2021

Back to the Present: Learning about the Euro Area through a Now-casting Model

Danilo Cascaldi-Garcia, Thiago RT Ferreira, Domenico Giannone, Michele Modugno

Abstract:

We build a model for simultaneously now-casting economic conditions in the euro area and its three largest member countries|Germany, France, and Italy. The model formalizes how market participants and policymakers monitor the euro area by incorporating all market moving indicators in real time. We find that area wide and country-specific data provide informative signals to now-cast the economic conditions in the euro area and member countries. The model provides accurate predictions of economic conditions in real time over a period that covers the past three recessions.

This paper was reposted April 2, 2021, with the following changes: In Figure 1, bars decomposing the nowcasted euro-area GDP growth across its main countries have been added, and an associated sentence on page 2 has been revised to reflect this.

Keywords: Now-casting, euro area, dynamic factor models

DOI: https://doi.org/10.17016/IFDP.2021.1313

PDF: Full Paper

Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment.

The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.

Back to Top
Last Update: April 02, 2021