The prominent measure of the current state of the Czech economy, gross domestic product (GDP), is available only with a significant lag of roughly 70 days. In this paper, we employ a Dynamic Factor Model (DFM) to nowcast Czech GDP in real time. Using multiple vintages of historical data and taking into account the publication lags of various monthly indicators, we evaluate the real-time performance of the DFM over the 2005–2012 period. The results suggest that the accuracy of model-based nowcasts is comparable to that of the judgmental nowcasts of the Czech National Bank (CNB). Our results also suggest that foreign variables are crucial for the accuracy of the model, while omitting financial and confidence indicators does not worsen the nowcasting performance. Finally, we show how releases of new data can be viewed through the lens of the dynamic factor model.
C53 - Forecasting and Other Model Applications ; C82 - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data ; E52 - Monetary Policy (Targets, Instruments, and Effects)
