NOWCASTING GDP GROWTH IN A SMALL OPEN ECONOMY

Nowcasting, that is, forecasting the current economic conditions, is a key ingredient for decision making, but it complex, even more so small open economy, due to higher volatility of its GDP. In this paper, we review required steps, taking Luxembourg as an example. We consider both standard and alternative indicators, used inputs in several nowcasting methods, including various factor machine learning models. Overall, mixed frequency dynamic models neural networks perform well, absolute terms relative with respect benchmark autoregressive model. The gains are larger during problematic times, such financial crisis recent Covid period.