Following the outbreak of the COVID-19 pandemic, most economic indicators experienced an increase in observed volatility, reducing the accuracy of nowcasting econometric models. In this paper, we propose a new specification for a mixed-frequency dynamic factor model used to nowcast the quarterly GDP growth rate of the Spanish economy –the Spain-STING–. With the aim of improving the predictive capacity of the model, we consider three proposals: (i) the relationship between the indicators and the estimated common factor is now contemporaneous, and not leading for some of the indicators; (ii) the variance of the common component is estimated by a stochastic process to allow it to vary over time; (iii) the set of variables is revised with the aim of including only those that add the most relevant information to the nowcast of the quarterly GDP growth rate. All these three modifications i...

This paper proposes a new version of the Spain-STING (Spain, Short-Term INdicator of Growth), a dynamic factor model used by the Banco de España for the short-term forecasting of the Spanish economy. The extended and revised version of the Spain-STING presented in this document includes a forecast for each of the demand components of the National Accounts. In order to select the indicators that best estimate the Spanish GDP and its demand components, several models are considered. Following this strategy, the selected models are those in which the common factor explains the highest proportion of the variance of the GDP. These models allow us to forecast GDP, private consumption, public expenditure, investment in capital goods, construction investment, exports and imports in a consistent way. We assess the predictive power of the models for GDP and its demand components for the period 20...

This paper proposes a new version of the Spain-STING (Spain, Short-Term INdicator of Growth), a dynamic factor model used by the Banco de España for the short-term forecasting of the Spanish economy. The extended and revised version of the Spain-STING presented in this document includes a forecast for each of the demand components of the National Accounts. In order to select the indicators that best estimate the Spanish GDP and its demand components, several models are considered. Following this strategy, the selected models are those in which the common factor explains the highest proportion of the variance of the GDP. These models allow us to forecast GDP, private consumption, public expenditure, investment in capital goods, construction investment, exports and imports in a consistent way. We assess the predictive power of the models for GDP and its demand components for the period 20...

This paper proposes a new version of the Spain-STING (Spain, Short-Term INdicator of Growth), a dynamic factor model used by the Banco de España for the short-term forecasting of the Spanish economy. The extended and revised version of the Spain-STING presented in this document includes a forecast for each of the demand components of the National Accounts. In order to select the indicators that best estimate the Spanish GDP and its demand components, several models are considered. Following this strategy, the selected models are those in which the common factor explains the highest proportion of the variance of the GDP. These models allow us to forecast GDP, private consumption, public expenditure, investment in capital goods, construction investment, exports and imports in a consistent way. We assess the predictive power of the models for GDP and its demand components for the period 20...