Mixed frequency models with MA components

Claudia Foroni, Massimiliano Marcellino and Dalibor Stevanovic

No 02/2018, Discussion Papers from Deutsche Bundesbank

Abstract: Temporal aggregation in general introduces a moving average (MA) component in the aggregated model. A similar feature emerges when not all but only a few variables are aggregated, which generates a mixed frequency model. The MA component is generally neglected, likely to preserve the possibility of OLS estimation, but the consequences have never been properly studied in the mixed frequency context. In this paper, we show, analytically, in Monte Carlo simulations and in a forecasting application on U.S. macroeconomic variables, the relevance of considering the MA component in mixed-frequency MIDAS and Unrestricted-MIDAS models (MIDASARMA and UMIDAS-ARMA). Specifically, the simulation results indicate that the short-term forecasting performance of MIDAS-ARMA and UMIDAS-ARMA is better than that of, respectively, MIDAS and UMIDAS. The empirical applications on nowcasting U.S. GDP growth, investment growth and GDP deflator inflation confirm this ranking. Moreover, in both simulation and empirical results, MIDAS-ARMA is better than UMIDAS-ARMA.

Keywords: temporal aggregation; MIDAS models; ARMA models (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:022018

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