Real-time GDP forecasting for Japan: A dynamic factor model approach

摘要

Real-time GDP forecasting for Japan: A dynamic factor model approach Accurate and timely information on GDP is important to gauge the overall state of the economy and is thus essential for economic pol-icymaking. A single-index dynamic factor model is estimated using mixed-frequency data on GDP, industrial production, employment, private consumption and exports to obtain early estimates of Japan's quarterly GDP growth in real time. The results of a realtime forecasting exercise suggest the model performs well in comparison to the consensus forecasts, in terms both of its accuracy, measured by the size of forecast errors, to predict actual GDP estimates, and of its ability to signal turning points in GDP, showing the advantage of using the model for early assessment of ongoing economic activities in Japan. An equally important goal of this study is to share with other forecasters the results of ongoing real-time GDP forecasts for Japan, aiming at increasing knowledge regarding Japan's GDP forecasting. J. Japanese Int. Economies 34 (2014) 116-134. Cabinet Office, Japan; Organisation for Economic Co-operation and Development, France.