Forecasting activities have historically played and will continue to play an important role in the Commission’s macro-economic activities. The European Commission Joint Research Centre contributes in the monitoring of macro-economic outcomes and in advising policy makers.
The Nowcasting group at JRC, in cooperation with partner institutions, develops econometric techniques and applies them for nowcasting and forecasting. Nowcasting techniques exploit data that become available in real time (including Big Data), so they can detect real time developments (for instance on GDP). This dashboard provides on the activities carried out with the group.
Mechanical (non-judgement) forecast of Harmonised Index of Consumer Prices (HICP) based on a BVAR with optimized hyperparameters, as in Giannone et al. (2015), expanded to deal with mixed frequencies. Additional details in the section Model.
Select the following paramaters:
Decompose model fit by the contribution of variable group (available only for the unconditional BVAR model). The solid line is the observed inflation level (annual % change, in deviations from the mean and from the contribution of initial conditions).
Forecast Error Variance Decomposition (FEVD) at different horizons.
Bayesian vector autoregressive (BVAR) model with 13 lags for the monthly model and 5 lags for the quarterly model as in Giannone et al. (2014).
To overcome the “curse of dimensionality” we shrink the model’s coefficients toward a naïve and parsimonious random walk with drift model. We use a Minnesota prior as De Mol et al. (2008) where the direction of shrinkage is controlled by a set of hyper-parameters: the overall tightness of the prior, the prior tightness on the lags greater than one, the sum-of-coefficient prior, the co-persistence prior, the prior on the covariance matrix. We maximize the log-likelihood via an iterative approach. Given the optimal set of hyper-parameters, we draw from the posterior distribution and get a density distribution for each variable and forecasting horizon.
The events were organized by the ‘Big Data and Economic Forecasting’ team within the Centre for Advanced Studies of the EC-JRC. The work is now carried out by the Nowcasting team:
Selected publications on macro-economic fore/now-casting (including also the work carried out within the bigNOMICS prjoect):
2024
2023
2022
2021
2020
All content of this site is for expositional purposes, and does not include judgement. This website is a research website and should not be considered as representative of the European Commission’s official position. The European Commission shall not be liable for any consequence stemming from the reuse of this content.
The Nowcasting team operates within the Economy and Finance unit at the European Commission Joint Research Centre.
E-mail: JRC-NOWCASTING@ec.europa.eu.
All content of this site is for expositional purposes, and does not include judgement. This website is a research website and should not be considered as representative of the European Commission’s official position. The European Commission shall not be liable for any consequence stemming from the reuse of this content.