Forecasting Euro area real GDP: optimal pooling of information

Hülsewig, Oliver; Mayr, Johannes; Wollmershäuser, Timo (2008): Forecasting Euro area real GDP: optimal pooling of information. CESifo Working Paper, 2371

Abstract

This paper proposes a new method of forecasting euro area quarterly real GDP that uses area-wide indicators, which are derived by optimally pooling the information contained in national indicator series. Following the ideas of predictive modeling, we construct the area-wide indicators by utilizing weights that minimize the variance of the out-of-sample forecast errors of the area-wide target variable. In an out-of-sample forecast experiment we find that our optimal pooling of information approach outperforms alternative forecasting methods in terms of forecast accuracy.

• Item Type: Paper (Discussion Paper)
• Faculties: Economics; Economics > Chairs > Chair in Public Finance
• Subjects: 300 Social sciences > 330 Economics
• Language: English