COMPARATIVE ANALYSIS OF TWO-STEP AND QUASI MAXIMUM LIKELIHOOD ESTIMATION IN THE DYNAMIC FACTOR MODEL FOR NOWCASTING GDP GROWTH IN INDONESIA

  • Gilbert Alvaro Souisa Departement Of Statistics, Faculty of Sciences and Data Analytics, Institut Teknologi Sepuluh Nopember, Indonesia https://orcid.org/0009-0003-5964-4804
  • Reyner M. Leiwakabessy Departement Of Statistics, Faculty of Sciences and Data Analytics, Institut Teknologi Sepuluh Nopember, Indonesia https://orcid.org/0009-0006-3506-5375
  • Salma Damayanti Departement Of Statistics, Faculty of Sciences and Data Analytics, Institut Teknologi Sepuluh Nopember, Indonesia https://orcid.org/0009-0001-5649-2505
  • Mohammad Zanuar F Terim Departement Of Statistics, Faculty of Sciences and Data Analytics, Institut Teknologi Sepuluh Nopember, Indonesia https://orcid.org/0009-0002-4953-265X
  • Shelma M Pelu Actuarial Study Program, Faculty of Mathematics and Natural Sciences, Institut Teknologi Bandung, Indonesia https://orcid.org/0009-0004-7996-1468
Keywords: Nowcasting, Dynamic Factor Model, Gross Domestic Product

Abstract

Economic activity data is needed quickly to make policy decisions, but this data suffers from publication delays. Gross Domestic Product (GDP) data is released within five weeks after the end of the quarter. An effort that can be made to provide such data is through nowcasting, which is forecasting in the current period using variables that have a higher frequency. This study aims at nowcasting GDP growth. The nowcasting method used is the Dynamic Factor Model (DFM) with Two Step (TS) and Quasi Maximum Likelihood (QML) estimation. The nowcasting results show that the DFM-TS model is better than the DFM-QML because it has a larger adjusted R-squared value and has the smallest RMSE value of 1.71035 compared to the DFM-QML value, which has an RMSE value of 1.71598.

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Published
2025-01-13
How to Cite
[1]
G. A. Souisa, R. M. Leiwakabessy, S. Damayanti, M. Z. F. Terim, and S. M. Pelu, “COMPARATIVE ANALYSIS OF TWO-STEP AND QUASI MAXIMUM LIKELIHOOD ESTIMATION IN THE DYNAMIC FACTOR MODEL FOR NOWCASTING GDP GROWTH IN INDONESIA”, BAREKENG: J. Math. & App., vol. 19, no. 1, pp. 655-664, Jan. 2025.