Spanish GDP short-term point and density forecasting using a mixed-frequency dynamic factor model

Abstract

We have assessed the effect of data releases when constructing short-term point and density forecasts of the Spanish gross domestic product growth. For this purpose, we considered a real-forecasting exercise in which we defined several pseudo-data vintages that had a mixture of monthly and quarterly frequencies and were unbalanced towards the end of the sample. We implemented a mixed-frequency dynamic factor model to deal with data features and to produce gross domestic product forecasts. We evaluated the predictive content of data releases from point and density forecast perspectives, the latter aspect of the analysis being previously unexplored in the literature producing Spanish gross domestic product short-term forecasts. We observed significant improvements in point forecasts as information is released throughout the quarter, confirming existing results. Additionally, our findings indicated substantial enhancements in the accuracy of density forecasts as new data releases materialized.