Template-Type: ReDIF-Paper 1.0

Author-Name: Gani Ramadani
Author-Name-First: Gani
Author-Name-Last: Ramadani
Author-Email: ramadanig@nbrm.mk
Author-Workplace-Name: National Bank of the Republic of North Macedonia
Author-Name: Magdalena Petrovska
Author-Name-First: Magdalena
Author-Name-Last: Petrovska
Author-Email: PetrovskaM@nbrm.mk
Author-Workplace-Name: National Bank of the Republic of North Macedonia
Author-Name: Vesna Bucevska
Author-Name-First: Vesna
Author-Name-Last: Bucevska
Author-Email: vesna.bucevska@eccf.ukim.edu.mk
Author-Workplace-Name: Faculty of Economics, Ss Cyril and Methodius University

Title: Evaluation of mixed frequency approaches for tracking near-term economic developments in North Macedonia

Abstract: Aggregate demand forecasting, also known as nowcasting when it applies to current quarter assessment, is of notable interest to policy makers. This paper concentrates on the empirical methods dealing with mixed-frequency data. In particular, it focuses on the MIDAS approach and its later extension, the Bayesian MF-VAR. The two strategies are evaluated in terms of their accuracy to nowcast Macedonian GDP growth, using same monthly frequency data set. The results of this study indicate that the MIDAS regressions demonstrate comparable forecasting performance to that of MF-VAR model. Moreover, it is interesting to note that the two approaches are reciprocal, since in general, their combined forecast demonstrates clear superiority in predicting business cycle turning points. Additionally, the MF-VAR model showed higher precision in times of increased uncertainty.

Length: 15

Creation-Date: 2021

File-URL: https://www.nbrm.mk/content/Evaluation-of-MF-approaches-for-tracking-NT-economic-developments-in-MK-WP3-2021.pdf

File-Format: Application/pdf

File-Function: First version, 2021

Number: 2021-03

Classification-JEL: E37, C53
Keywords: MF-VAR, Bayesian estimation, MIDAS, Forecast pooling, Forecast evaluation
Handle: RePEc:mae:wpaper:2021-03