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Working Paper
Are Revisions to State-Level GDP Data in the US Well Behaved?
No, first estimates of state GDP growth are not rational forecasts, except for Georgia. Revisions to first estimates of state-level GDP growth tend to be biased, large, and/or predictable using information known at the time of the first estimate.
Working Paper
The Labor Market Impact of a Pandemic: Validation and Application of a Do-It-Yourself CPS
The Current Population Survey (CPS) is a central source of U.S. labor market data. We show that, for a few thousand dollars, researchers can quickly design and implement their own online survey to supplement the CPS. The survey closely follows core features of the CPS, ensuring that outcomes are conceptually compatible and allowing researchers to weight and validate results using the official CPS. Yet the survey also allows for faster data collection, added flexibility and novel questions. We show that the survey provided useful estimates of U.S. labor market aggregates several weeks ahead of ...
Working Paper
Measurement Errors and Monetary Policy: Then and Now
Should policymakers and applied macroeconomists worry about the difference between real-time and final data? We tackle this question by using a VAR with time-varying parameters and stochastic volatility to show that the distinctionbetween real-time data and final data matters for the impact of monetary policy shocks: The impact on final data is substantially and systematically different (in particular, larger in magnitude for different measures of real activity) from theimpact on real-time data. These differences have persisted over the last 40 years and should be taken into account when ...
Working Paper
Two Measures of Core Inflation: A Comparison
Trimmed-mean Personal Consumption Expenditure (PCE) inflation does not clearly dominate ex-food-and-energy PCE inflation in real-time forecasting of headline PCE inflation. However, trimmed-mean inflation is the superior communications and policy tool because it is a less-biased real-time estimator of headline inflation and because it more successfully filters out headline inflation?s transitory variation, leaving only cyclical and trend components.
Working Paper
Forecasting Consumption Spending Using Credit Bureau Data
This paper considers whether the inclusion of information contained in consumer credit reports might improve the predictive accuracy of forecasting models for consumption spending. To investigate the usefulness of aggregate consumer credit information in forecasting consumption spending, this paper sets up a baseline forecasting model. Based on this model, a simulated real-time, out-of-sample exercise is conducted to forecast one-quarter ahead consumption spending. The exercise is run again after the addition of credit bureau variables to the model. Finally, a comparison is made to test ...
Working Paper
Nowcasting Inflation
This chapter summarizes the mixed-frequency methods commonly used for nowcasting inflation. It discusses the importance of key high-frequency data in producing timely and accurate inflation nowcasts. In the US, consensus surveys of professional forecasters have historically provided an accurate benchmark for inflation nowcasts because they incorporate professional judgment to capture idiosyncratic factors driving inflation. Using real-time data, we show that a relatively parsimonious mixed-frequency model produces superior point and density nowcasting accuracy for headline inflation and ...
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Real-time inflation forecasting in a changing world
This paper revisits the accuracy of inflation forecasting using activity and expectations variables. We apply Bayesian-model averaging across different regression specifications selected from a set of potential predictors that includes lagged values of inflation, a host of real activity data, term structure data, nominal data, and surveys. In this model average, we can entertain different channels of structural instability by incorporating stochastic breaks in the regression parameters of each individual specification within this average, allowing for breaks in the error variance of the ...
Working Paper
Combining Survey Long-Run Forecasts and Nowcasts with BVAR Forecasts Using Relative Entropy
This paper constructs hybrid forecasts that combine both short- and long-term conditioning information from external surveys with forecasts from a standard fixed-coefficient vector autoregression (VAR) model. Specifically, we use relative entropy to tilt one-step ahead and long-horizon VAR forecasts to match the nowcast and long-horizon forecast from the Survey of Professional Forecasters. The results indicate meaningful gains in multi-horizon forecast accuracy relative to model forecasts that do not incorporate long-term survey conditions. The accuracy gains are achieved for a range of ...
Working Paper
Forecasting GDP Growth with NIPA Aggregates
Beyond GDP, which is measured using expenditure data, the U.S. national income and product accounts (NIPAs) provide an income-based measure of the economy (gross domestic income, or GDI), a measure that averages GDP and GDI, and various aggregates that include combinations of GDP components. This paper compiles real-time data on a variety of NIPA aggregates and uses these in simple time-series models to construct out-of-sample forecasts for GDP growth. Over short forecast horizons, NIPA aggregates?particularly consumption and GDP less inventories and trade?together with these simple ...
Working Paper
Nowcasting U.S. Headline and Core Inflation
Forecasting future inflation and nowcasting contemporaneous inflation are difficult. We propose a new and parsimonious model for nowcasting headline and core inflation in the U.S. price index for personal consumption expenditures (PCE) and the consumer price index (CPI). The model relies on relatively few variables and is tested using real-time data. The model?s nowcasting accuracy improves as information accumulates over the course of a month or quarter, and it easily outperforms a variety of statistical benchmarks. In head-to-head comparisons, the model?s nowcasts of CPI infl ation ...