Nowcasting and forecasting GDP growth with machine-learning sentiment indicators

Affordable Access

Download Read

Nowcasting and forecasting GDP growth with machine-learning sentiment indicators

Authors
Type
Preprint
Journal
IREA Working Papers 2021-03
Publication Date
Mar 04, 2021
Source
MyScienceWork
Keywords
License
Green

Abstract

We apply the two-step machine-learning method proposed by Claveria et al. (2021) to generate country-specific sentiment indicators that provide estimates of year-on-year GDP growth rates. In the first step, by means of genetic programming, business and consumer expectations are evolved to derive sentiment indicators for 19 European economies. In the second step, the sentiment indicators are iteratively re-computed and combined each period to forecast yearly growth rates. To assess the performance of the proposed approach, we have designed two out-of-sample experiments: a nowcasting exercise in which we recursively generate estimates of GDP at the end of each quarter using the latest survey data available, and an iterative forecasting exercise for different forecast horizons We found that forecasts generated with the sentiment indicators outperform those obtained with time series models. These results show the potential of the methodology as a predictive tool.

Report this publication

Statistics

Seen <100 times
Downloaded <100 times