Nowcasting Real GDP for Saudi Arabia

Alkhareif, Ryadh M. and Barnett, William A. (2020): Nowcasting Real GDP for Saudi Arabia.

Abstract

The paper constructs monthly GDP nowcasts for Saudi Arabia by estimating a Generalized Dynamic Factor Model (GDFM) on a panel of 272 variables over the period from January 2010 to June 2018. The GDP nowcasts produced in this paper can accurately mimic GDP growth rates for Saudi Arabia, including for the non-oil sector. Our GDFM has outperformed other traditional models in tracking the business cycle in Saudi Arabia. In our view, the non-oil private sector GDP nowcasts provided in this paper can substitute the traditional set of indicators used to monitor monthly private sector activity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Nowcast; non-oil GDP; generalized dynamic factor model; principal components analysis.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit

References

Aastveit, Knut Are, and Tørres Trovik (2012), "Nowcasting Norwegian GDP: The role of asset prices in a small open economy." Empirical Economics 42, no. 1: 95-119.

Alkhareif, Ryadh M., William A. Barnett, and Nayef A. Alsadoun (2017), "Estimating the Output Gap for Saudi Arabia." International Journal of Economics and Finance 9, no. 3: 81.

Alkhareif, Ryadh M., and William A. Barnett (a2015), "Core inflation indicators for Saudi Arabia." Panoeconomicus 62, no. 3: 257-266.

Altissimo, Filippo, Riccardo Cristadoro, Mario Forni, Marco Lippi, and Giovanni Veronese (2010), "New Eurocoin: tracking economic growth in real time." The Review of Economics and Statistics 92, no. 4: 1024-1034.

Arnoštová, Kateřina, David Havrlant, Luboš Růžička, and Peter Tóth (2011), "Short-term forecasting of Czech quarterly GDP using monthly indicators." Finance a úvěr (Czech Journal of Economics and Finance) 61, no. 6: 566-583.

Banbura, Marta, Domenico Giannone, Michele Modugno, and Lucrezia Reichlin (2013), Now-casting and the real-time data flow. Handbook of economic forecasting 2, no. Part A: 195-237.

Barnett, William A., and Ryadh M. Alkhareif. Advances in Monetary Policy Design: Applications to the Gulf Monetary Union (2013), Cambridge Scholars Publishing.

Barnett, William A., and Ryadh M. Alkhareif (b2015), "Modern and traditional methods for measuring money supply: the case of Saudi Arabia." International Journal of Financial Studies 3, no. 1: 49-55.

Bok, Brandyn, Daniele Caratelli, Domenico Giannone, Argia M. Sbordone, and Andrea Tambalotti (2018), "Macroeconomic nowcasting and forecasting with big data." Annual Review of Economics 0.

Cristadoro, Riccardo, Giuseppe Saporito, and Fabrizio Venditti (2013), "Forecasting inflation and tracking monetary policy in the euro area: does national information help?" Empirical Economics 44, no. 3: 1065-1086.

Cristadoro, Riccardo, Mario Forni, Lucrezia Reichlin, and Giovanni Veronese (2005), "A core inflation indicator for the euro area." Journal of Money, Credit and Banking: 539-560.

Engle, Robert F (1974), "Band spectrum regression." International Economic Review: 1-11.

Forni, Mario, Marc Hallin, Marco Lippi, and Lucrezia Reichlin (2000), "The generalized dynamic-factor model: Identification and estimation." Review of Economics and statistics 82, no. 4: 540-554.

Forni, Mario, Marc Hallin, Marco Lippi, and Lucrezia Reichlin (2001), "Coincident and leading indicators for the Euro area." The Economic Journal 111, no. 471: 62-85.

Forni, Mario, Marc Hallin, Marco Lippi, and Lucrezia Reichlin (2005), "The generalized dynamic factor model: one-sided estimation and forecasting." Journal of the American Statistical Association 100, no. 471: 830-840.

Forni, Mario, and Marco Lippi (2011), "The general dynamic factor model: One-sided representation results." Journal of Econometrics 163, no. 1: 23-28.

Giannone, Domenico, Lucrezia Reichlin, and David Small (2008), "Nowcasting: The real-time informational content of macroeconomic data." Journal of Monetary Economics 55, no. 4: 665-676.

Hallin, Marc, and Roman Liška (2007), "Determining the number of factors in the general dynamic factor model." Journal of the American Statistical Association 102, no. 478: 603-617.

Jansen, W. Jos, Xiaowen Jin, and Jasper M. de Winter (2016), "Forecasting and nowcasting real GDP: comparing statistical models and subjective forecasts." International Journal of Forecasting 32, no. 2: 411-436.

Mariano, Roberto S., and Yasutomo Murasawa (2003), "A new coincident index of business cycles based on monthly and quarterly series." Journal of applied Econometrics 18, no. 4: 427-443.

Stock, James H., and Mark Watson (2011), "Dynamic factor models." Oxford handbook on economic forecasting.