ABSTRACT This paper uses an extension of the Euro‐Sting single‐index dynamic factor model to construct short‐term forecasts of quarterly GDP growth for the euro area by accounting for financial variables as leading indicators. From a simulated real‐time exercise, the model is used to...

In this paper, I extend to a multiple-equation context the linearity, model selection and model adequacy tests recently proposed for univariate smooth transition regression models. Using this result, I examine the nonlinear forecasting power of the Conference Board composite index of leading...