Nowcasting GDP of Bosnia and Herzegovina: A Comparison of Forecast Accuracy Models

Abstract The paper explores the possibilities of creating an econometric model for making short-term forecasts of the Gross Domestic Product of Bosnia and Herzegovina (GDP of B&H). Its aim is to determine the most representative and most efficient model for forecasting the quarterly GDP of B&H. This is the first paper that simultaneously compares ARIMA models, bridge models and factor models in three different time periods. All variables are available for the period of 2006q1-2016q4. The final choice of the model for forecasting the quarterly GDP of B&H was selected on the basis of a comparative analysis of the predictive efficiency of the analysed models. Based on the obtained results, the most efficient model for forecasting quarterly GDP of B&H is the bridge model, which includes four variables as regressor: Retail sale of other goods, Total loans, Manufacturing and Manufacture of food products.