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Taking the Pulse of the Economy: Measuring GDP

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  • J. Steven Landefeld
  • Eugene P. Seskin
  • Barbara M. Fraumeni
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    Abstract

    This article provides a broad overview of the measurement techniques used in estimating GDP and the national accounts in the United States. In the United States, the GDP and the national accounts estimates are fundamentally based on detailed economic census data and other information that is available only once every five years. The challenge lies in developing a framework and methods that take these economic census data and combine them using a mosaic of monthly, quarterly, and annual economic indicators to produce quarterly and annual GDP estimates. One problem is that the other economic indicators that are used to extrapolate GDP in between the five-year economic census data -- such as retail sales, housing starts, and manufacturers shipments of capital goods -- are often collected for purposes other than estimating GDP and may embody definitions that differ from those used in the national accounts. Another problem is some data are simply not available for the earlier estimates in the reporting process. For the initial monthly estimates of GDP, data on about 25 percent of GDP -- especially in the service sector -- are not available, and so these sectors of the economy are estimated based on past trends and whatever related data are available. The initial monthly GDP estimates based on these extrapolations are revised as more complete data become available In producing the national accounts estimates, the Bureau of Economic Analysis attempts to strike a balance between accuracy and timeliness so that the estimates can be used to monitor real overall economic growth and inflation, as well as major sectors of interest.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.22.2.193
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 22 (2008)
    Issue (Month): 2 (Spring)
    Pages: 193-216

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    Handle: RePEc:aea:jecper:v:22:y:2008:i:2:p:193-216

    Note: DOI: 10.1257/jep.22.2.193
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    1. Simon Kuznets, 1934. "National Income, 1929-1932," NBER Books, National Bureau of Economic Research, Inc, number kuzn34-1, October.
    2. Jon Faust & John H. Rogers & Jonathan H. Wright, 2000. "News and noise in G-7 GDP announcements," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 690, Board of Governors of the Federal Reserve System (U.S.).
    3. Dennis J. Fixler & Jeremy Nalewaik, 2010. "News, Noise, and Estimates of the "True" Unobserved State of the Economy," BEA Working Papers, Bureau of Economic Analysis 0068, Bureau of Economic Analysis.
    4. Stefano Scarpetta & Andrea Bassanini & Dirk Pilat & Paul Schreyer, 2000. "Economic Growth in the OECD Area: Recent Trends at the Aggregate and Sectoral Level," OECD Economics Department Working Papers 248, OECD Publishing.
    5. N. Gregory Mankiw & Matthew D. Shapiro, 1986. "News or Noise? An Analysis of GNP Revisions," NBER Working Papers 1939, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Michael P. Clements & Ana Beatriz Galv�o, 2011. "Improving Real-time Estimates of Output Gaps and Inflation Trends with Multiple-vintage Models," Working Papers, Queen Mary, University of London, School of Economics and Finance 678, Queen Mary, University of London, School of Economics and Finance.
    2. Hsieh, Wen-jen, 2011. "The Global Economic Recession and Industrial Structure: Evidence from Four Asian Dragons," ADBI Working Papers, Asian Development Bank Institute 315, Asian Development Bank Institute.
    3. Jennifer Castle & David Hendry & Michael P. Clements, 2014. "Robust Approaches to Forecasting," Economics Series Working Papers 697, University of Oxford, Department of Economics.
    4. Markus K. Brunnermeier & Gary Gorton & Arvind Krishnamurthy, 2012. "Risk Topography," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 149 - 176.
      • Markus K. Brunnermeier & Gary Gorton & Arvind Krishnamurthy, 2011. "Risk Topography," NBER Chapters, in: NBER Macroeconomics Annual 2011, Volume 26, pages 149-176 National Bureau of Economic Research, Inc.
    5. Clements, Michael P. & Galvão, Ana Beatriz, 2009. "First Announcements and Real Economic Activity," The Warwick Economics Research Paper Series (TWERPS) 885, University of Warwick, Department of Economics.
    6. Clements, Michael P., 2012. "Do professional forecasters pay attention to data releases?," International Journal of Forecasting, Elsevier, Elsevier, vol. 28(2), pages 297-308.
    7. Gilbert, Thomas, 2011. "Information aggregation around macroeconomic announcements: Revisions matter," Journal of Financial Economics, Elsevier, Elsevier, vol. 101(1), pages 114-131, July.
    8. Charles F. Manski, 2014. "Communicating Uncertainty in Official Economic Statistics," NBER Working Papers 20098, National Bureau of Economic Research, Inc.
    9. Clements, Michael P. & Galvão, Ana Beatriz, 2013. "Forecasting with vector autoregressive models of data vintages: US output growth and inflation," International Journal of Forecasting, Elsevier, Elsevier, vol. 29(4), pages 698-714.
    10. Clements, Michael P., 2010. "Explanations of the inconsistencies in survey respondents' forecasts," European Economic Review, Elsevier, Elsevier, vol. 54(4), pages 536-549, May.
    11. Clements, Michael P., 2012. "US inflation expectations and heterogeneous loss functions, 1968–2010," The Warwick Economics Research Paper Series (TWERPS) 986, University of Warwick, Department of Economics.
    12. Konchitchki, Yaniv & Patatoukas, Panos N., 2014. "Accounting earnings and gross domestic product," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 57(1), pages 76-88.
    13. Stijepic, Denis & Wagner, Helmut, 2009. "Population-ageing, structural change and productivity growth," MPRA Paper 37005, University Library of Munich, Germany, revised 29 Feb 2012.
    14. Jacky Mallett & Charles Keen, 2012. "Does GDP measure growth in the economy or simply growth in the money supply?," Papers 1208.0642, arXiv.org.
    15. Gabriele Fiorentini & Enrique Sentana, 2013. "Dynamic Specification Tests For Dynamic Factor Models," Working Papers, CEMFI wp2013_1306, CEMFI.

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