Principality of Andorra: Selected Issues

This Selected Issues paper develops a mixed-frequency nowcasting framework to provide a timely estimate of quarterly gross domestic product (GDP) growth in Andorra using high-frequency indicators. The results confirm the central role of tourism-related variables and external conditions—particularly Spain’s GDP growth—in explaining short-term fluctuations in activity. Overall, the framework delivers a transparent real-time estimate of GDP ahead of its release. The analysis highlights important data limitations, most notably in capturing construction activity at high frequency. The available proxies only partially reflect sectoral dynamics: either because they do not fully capture labor and imported inputs or because combining them leads to multicollinearity, suggesting that the contribution to growth may be underestimated. A replication package is available upon request and will be made available to the authorities. The package includes an annotated Stata code covering data preparation, the Bayesian Model Averaging indicators selection, and the estimation of the mixed-frequency dynamic factor model. This allows the framework to be easily updated as new data becomes available and adapted by the authorities for ongoing monitoring.