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Nowcasting norwegian GDP: the role of asset prices in a small open economy

Empirical Economics volume 42, pages 95–119 (2012)Cite this article

Abstract

This article finds that asset prices on Oslo Stock Exchange is the single most important block of data to improve estimates of current quarter GDP in Norway. We use an approximate dynamic factor model that is able to handle new information as it is released, thus the marginal impact on mean square nowcasting error can be studied for a large number of variables. We use a panel of 148 non-synchronous variables. The high informational content in asset prices is explained by reference to the small size of companies on Oslo Stock Exchange and the small and open nature of the Norwegian economy.

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Acknowledgments

We gratefully acknowledge Domenico Giannone for making Matlab codes used by Giannone et al. (2008) available to us. We will also thank the editor, the referees, Hilde C. Bjørnland, Michele Modugno, Ragnar Nymoen, Terje Skjerpen, Shaun Vahey as well as conference participants at The 28 International Symposium on Forecasting in Nice, The 23rd Annual Congress of the European Economic Association in Milan and seminar participants at The 2007 Nowcasting Seminar in Norges Bank and University of Oslo for helpful comments. Views expressed are those of the authors and do not necessarily reflect the views of Norges Bank and The World Bank.

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Authors and Affiliations

  1. Economics Department, Norges Bank, Bankplassen 2, 0107, Oslo, Norway

    Knut Are Aastveit

  2. University of Oslo, Oslo, Norway

    Knut Are Aastveit

  3. The World Bank Treasury, Quantitative Strategies, Washington, DC, USA

    Tørres Trovik

  4. Research Department, Norges Bank, Oslo, Norway

    Tørres Trovik

Authors
  1. Knut Are Aastveit
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  2. Tørres Trovik
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Correspondence to Knut Are Aastveit.

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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

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Aastveit, K.A., Trovik, T. Nowcasting norwegian GDP: the role of asset prices in a small open economy. Empir Econ 42, 95–119 (2012). https://doi.org/10.1007/s00181-010-0429-9

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  • DOI: https://doi.org/10.1007/s00181-010-0429-9

Keywords

  • Forecasting
  • Financial markets
  • Monetary policy
  • Factor models
  • Small open economy

JEL Classification

  • C33
  • C53
  • E52
  • G14