Description

The aim of this document is to provide a fo recasting tool that faci litates understanding economic developments in a timely manner. This is pursued through the Bridge Model approach by using it to relate a large set of monthly indicators to Chilean GDP and its main components. The outcome is a set of simple equations that characterize reasonably well total GDP and the feasible supply- and dema nd-side components based on a small set of relevant indicators. The selected equations ge nerally provide better short-term forecasts than simple autoregressive models. However, if needed, the equation selection methodology is straightforward enough to upda te the equations easily making it an attractive tool for real-time forecasting.