Report

Macroeconomic nowcasting and forecasting with big data


Abstract: Data, data, data . . . Economists know it well, especially when it comes to monitoring macroeconomic conditions?the basis for making informed economic and policy decisions. Handling large and complex data sets was a challenge that macroeconomists engaged in real-time analysis faced long before ?big data? became pervasive in other disciplines. We review how methods for tracking economic conditions using big data have evolved over time and explain how econometric techniques have advanced to mimic and automate the best practices of forecasters on trading desks, at central banks, and in other market-monitoring roles. We present in detail the methodology underlying the New York Fed Staff Nowcast, which employs these innovative techniques to produce early estimates of GDP growth, synthesizing a wide range of macroeconomic data as they become available.

Keywords: monitoring economic conditions; business cycle; macroeconomic data; large data sets; high-dimensional data; real-time data flow; factor model; state space models; Kalman filter;

JEL Classification: C32; C53; C55; E32;

Access Documents

File(s): File format is text/html https://www.newyorkfed.org/research/staff_reports/sr830.html
Description: Summary

File(s): File format is application/pdf https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr830.pdf
Description: Full text

Authors

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2017-11-01

Number: 830