Spain-Sting: Spain Short-Term Indicator of Growth

We develop a dynamic factor model to compute short-term forecasts of the Spanish GDP growth in real time. With this model, we compute a business cycle index which operates as an indicator of the business cycle conditions in Spain. To examine its real-time forecasting accuracy, we use real-time data vintages from 2008.02 through 2009.01. We conclude that the model exhibits good forecasting performance anticipating the recent and sudden downturn.

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