Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Editor Jan Smets, Governor of the National Bank of Belgium Terms of use: Documents in Statement of purpose:The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. Orders AbstractThis paper analyses the contribution of survey data, in particular various sentiment indicators, to nowcasts of quarterly euro area GDP. It uses a genuine real-time dataset that is constructed from original press releases in order to transform the actual data ow into an interpretable ow of news. The latter is de ned as the di erence between the released values and the prediction of a mixedfrequency dynamic factor model. Our purpose is twofold. First, we aim to quantify the speci c value added for nowcasting GDP from a set of heterogeneous data releases including not only sentiment indicators constructed by Eurostat, Markit,

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This paper has benefited from stimulating discussions with several members of the "Economic Analysis and Forecasting Department" at the Banco de España. We would also like to thank, without implicating, Samuel Hurtado, Gabriel Perez-Quiros and Alberto Urtasun for comments and suggestions at the earliest stage of the work. DISCLAIMER: The views expressed in this paper are the author's, not those of Banco de España.

This paper proposes the use of dynamic factor models as an alternative to the VAR-based tools for the empirical validation of dynamic stochastic general equilibrium (DSGE) theories. Along the lines of Giannone et al. (2006), we use the state-space parameterisation of the factor models proposed by Forni et al. (2007) as a competitive benchmark that is able to capture weak statistical restrictions that DSGE models impose on the data. Beyond the weak restrictions, which are given by the number of shocks and the number of state variables, the behavioural restrictions embedded in the utility and production functions of the model economy contribute to achieve further parsimony. Such parsimony reduces the number of parameters to be estimated, potentially helping the general equilibrium environment improve forecast accuracy. In turn, the DSGE model is considered to be misspecifi ed when it is outperformed by the state-space representation that only incorporates the weak restrictions.

This paper analyses the nowcasting performance of hyperparameterised dynamic regression models with a large number of variables in log levels, and compares it with state-of-the-art methods for nowcasting. We deal with the 'curse of dimensionality' by exploiting prior information originating in the Bayesian VAR literature. The real-time forecast simulation conducted over the most severe phase of the Great Recession shows that our method yields reliable GDP predictions almost one and a half months before the official figures are published. The usefulness of our approach is confirmed in a genuine out-of-sample evaluation over the European sovereign debt crisis and subsequent recovery.