Ukrainian quartal GDP forecasting using dynamic factor model
Journal Title: Економіка. Фінанси. Право - Year 2019, Vol 1, Issue
Abstract
Introduction. Due to the fact that official statistics of Ukraine's GDP are released with a delay, there is a need for current forecasting of quarterly GDP or so-called nowcasting. To do this, you can use other basic economic indicators that determine quarterly GDP, but are published with higher frequency (monthly or even more often) or with the same frequency. Purpose. The purpose of the investigation is forecasting the quarterly Ukrainian real GDP with a small dynamic factor model based on the quarterly and monthly values of the basic socio-economic macroeconomic indicators of Ukraine’s development. Results. The dynamic factor model of Ukraine's GDP is based on the statistics on the 11 main indicators of the socio-economic development of Ukraine from 2002 to 2018. The input data are macroeconomic indicators, namely: volume of industrial products sold, average monthly nominal wages and salaries per employee, consumer price indices for goods and services, official exchange rate of Hryvnia against US dollar, average salary, turnover of retail trade, agricultural output, gross domestic product, export of goods and services, import of goods and services, capital investments, income of the population. The input data are mixed-frequency. A dynamic factor model is based on the assumption that a small number of factors can explain a large part of the fluctuations of many macroeconomic variables, what’s more predictors can be unobservable. The correlation matrix, elements of which are evi-dence of a weak correlation between factors, confirmed the correctness of the factors selected for forecasting. Parametrization of the dynamic factor model equations is performed on the basis of input data using the principal component method and the Kalman filter. Conclusion. The forecast of quarterly Ukrainian GDP was developed for the first two quarters of 2018. The projected values exceed the values published by the Ministry of Finance of Ukraine and State Statistics Service of Ukraine by 1.7 and 0.45 percent, respectively, for the first and second quarters of 2018, which is a good indicator of the quality of the forecast.
Authors and Affiliations
Larysa Mykolaivna Zomchak, Anastasiia Serhiivna Rakova
Keywords
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