Nowcasting the New Turkish GDP

Abstract

In this study, we predict year-on-year and quarter-on-quarter Turkish GDP growth rates between 2012:Q1 and 2016:Q4 with a medium-scale dataset. Our proposed model outperforms both the competing dynamic factor model (DFM) and univariate benchmark models. Our results suggest that in nowcasting current GDP, all relevant information is released within the contemporaneous quarter; hence, no predictive power is added afterwards. Moreover, we show that the inclusion of construction/ service sector variables and credit variables improves the prediction accuracy of the DFM.