| Abstract: |
In this study, we predict year-over-year Turkish GDP growth rates between
2012:Q1 and 2016:Q4 with a medium-scale dataset. Our proposed model improves
upon \citet{Modugno2016} and 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, information content regarding leading
variables is limited. Moreover, we show that the inclusion of financial
variables deteriorates the forecasting performance of the DFM, whereas credit
variables improve the prediction accuracy of the DFM. |