EEU Policy Brief #3
Authors Matthew Gordon and Ivan Mendieta-Muñoz have put together a research brief on Nowcasting Regional GDP in Utah
Using Dynamic Factor Models.
Key findings include:
- Dynamic factor models can be used to obtain nowcasts for Utah’s GDP using either expectation-maximization
or two-stage principal components methods, thus providing a real-time read on the heartbeat of Utah’s Economy.
- Nowcasting Utah’s GDP should be carried out using the two-stage principal components
The models constructed using this method show moderate to large improvements in forecasting
accuracy (11% to 28%) compared to other benchmark models, and can accurately track the peaks and
troughs of Utah’s GDP as more observations become available.
Read the full policy brief: Nowcasting Regional GDP in Utah Using Dynamic Factor Models