## Assessing the Impact of Policy Changes on a Nowcast

_IMF Working Papers, July 28, 2023_

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## Bibliographic details
- Authors: Sam Ouliaris, Celine Rochon
- Published: July 28, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400249716.001

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### Summary
- Nowcasting provides forecasts of key macroeconomic indicators using higher frequency data to deliver more timely information for proposed policy changes.
- A major limitation of standard nowcasting estimators is their “reduced-form” nature, which prevents assessing the impact of policy changes on baseline nowcasts (for example, on the baseline nowcast of real GDP).
- The paper outlines two methodologies to overcome this limitation and illustrates each with a country-specific example.

### Methodologies
- Partial equilibrium approach
  - Uses an existing baseline nowcasting regression.
  - Combines that regression with single-equation forecasting models for the high-frequency data included in the nowcasting regression.
- Non-parametric structural VAR approach
  - Uses a non-parametric structural VAR estimator introduced in Ouliaris and Pagan (2022).
  - Imposes minimal identifying restrictions on the data to estimate the impact of structural shocks.

### Illustrations and Empirical Focus
- Each methodological approach is illustrated using a country-specific example.
- Subject areas and keywords highlighted in the source include:
  - Econometric analysis, Economic forecasting, Oil prices, Prices, Structural vector autoregression, Vector autoregression
  - baseline Nowcasting regression, Caribbean, frequency data, Global, high frequency indicators, impulse responses, Nowcasting, Oil prices, Real GDP of Dominica, structural models, Structural vector autoregression, USA real GDP, Vector autoregression, year-on-year percentage

### Implications for Researchers and Policymakers
- Provides practical frameworks to move from reduced-form nowcasts to counterfactual assessment of policy changes.
- Enables policy analysis that links high-frequency indicator forecasting to impacts on baseline nowcasts of macroeconomic variables such as real GDP.
- Offers a complementary pair of tools: a partial-equilibrium, regression-based strategy suitable when a baseline nowcast exists, and a structural VAR-based strategy suited when structural shock identification with minimal restrictions is preferred.

### Key statistics and identifiers
- Pages: 18
- Issue: 153
- Volume: 2023
- DOI: https://doi.org/10.5089/9798400249716.001
- ISBN: 9798400249716
- ISSN: 1018-5941
- Publication date: July 28, 2023

*Source: Assessing the Impact of Policy Changes on a Nowcast, Sam Ouliaris and Celine Rochon, July 28, 2023.*

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_Source: https://www.imf.org/en/publications/wp/issues/2023/07/28/assessing-the-impact-of-policy-changes-on-a-nowcast-537286_