Nowcasting in a pandemic using non-parametric mixed frequency VARs

This paper develops Bayesian econometric methods for posterior inference in non -parametric mixed frequency VARs using additive regression trees. We argue that regres-sion tree models are ideally suited for macroeconomic nowcasting in the face of extreme observations, for instance those produced by the COVID-19 pandemic of 2020. This is due to their flexibility and ability to model outliers. In an application involving four major euro area countries, we find substantial improvements in nowcasting performance relative to a linear mixed frequency VAR.(c) 2020 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).