Uncertainty and Output Growth Forecasts in Real Time

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Uncertainty and Output Growth Forecasts in Real Time

Author Info

Bernard Babineau
Nathanael Braun

Abstract

The objective of this paper is twofold. First, we introduce the importance of utilising real-time data for macroeconomic analysis by reviewing the relevant literature on real-time analysis and by looking at real-time output data sets for Canada and the US. Although the use of real-time data has begun to be exploited in the US, there is almost no comparable real-time research in Canada. Real-time data are shown to play an important role in our understanding of the economy, in particular due to the unforeseen magnitude and bias or data revisions. The second part of our paper addresses the impact that including real-time data can have short- and medium-term forecasting uncertainty. Our findings are that both data and parameter uncertainty are statistically and economically significant. Failure to take these into account will lead to an underestimation of the actual uncertainty around output growth.

Ce papier à essentiellement deux objectifs. Le premier est de souligner l’importance des données en temps réel en macroéconomie en effectuant un bref survol de la littérature. Bien qu’il y ait eu un début d’utilisation des données en temps réel dans certaines études américaines, aucune démarche comparable a été entamée au Canada. On démontre dans ce papier que les données « réelles » jouent un rôle important dans la compréhension de l’économie et plus particulièrement en ce qui à trait à la magnitude et au biais des révisions dans les données. Le second objectif concerne l’impact de données en temps réel sur les prévisions à court et à moyen termes. Nos résultats dévoilent que l’incertitude entourant les données et la valeur des paramètres est statistiquement et économiquement important. Ne pas tenir compte de ces facteurs mène à une sous-estimation de l’incertitude entourant la croissance du PIB.

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Paper provided by Department of Finance Canada in its series Working Papers-Department of Finance Canada with number 2003-07.

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Handle: RePEc:fca:wpfnca:2003-07

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This paper has been announced in the following NEP Reports:

NEP-ALL-2003-10-28 (All new papers)
NEP-ECM-2003-10-28 (Econometrics)

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This page was last updated on 2009-12-2.

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