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The use and abuse of "real-time" data in economic forecasting

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Author Info
Evan F. Koenig
Sheila Dolmas
Jeremy Piger

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Abstract

We distinguish between three different ways of using real-time data to estimate forecasting equations and argue that the most frequently used approach should generally be avoided. The point is illustrated with a model that uses monthly observations of industrial production, employment, and retail sales to predict real GDP growth. When the model is estimated using our preferred method, its out-of-sample forecasting performance is clearly superior to that obtained using conventional estimation, and compares favorably with that of the Blue-Chip consensus.

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Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 00-04.

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Date of creation: 2000
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Handle: RePEc:fip:feddwp:00-04

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Keywords: Gross domestic product;

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    Other versions:
  3. Norman R. Swanson & Halbert White, 1997. "A Model Selection Approach To Real-Time Macroeconomic Forecasting Using Linear Models And Artificial Neural Networks," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 540-550, November. [Downloadable!] (restricted)
    Other versions:
  4. Terry J. Fitzgerald & Preston J. Miller, 1989. "A simple way to estimate current-quarter GNP," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 27-31. [Downloadable!]
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  16. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  17. Bharat Trehan, 1989. "Forecasting growth in current quarter real GNP," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 39-52. [Downloadable!]
  18. Jon Faust & John H. Rogers & Jonathan H. Wright, 2000. "News and noise in G-7 GDP announcements," International Finance Discussion Papers 690, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  19. West, Kenneth D & McCracken, Michael W, 1998. "Regression-Based Tests of Predictive Ability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 817-40, November.
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  20. Robert Ingenito & Bharat Trehan, 1996. "Using monthly data to predict quarterly output," Economic Review, Federal Reserve Bank of San Francisco, pages 3-11. [Downloadable!]
  21. Evan F. Koenig, 1996. "Capacity utilization as a real-time predictor of manufacturing output," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 16-23. [Downloadable!]
  22. Swanson, Norman R. & White, Halbert, 1997. "Forecasting economic time series using flexible versus fixed specification and linear versus nonlinear econometric models," International Journal of Forecasting, Elsevier, vol. 13(4), pages 439-461, December. [Downloadable!] (restricted)
  23. R. Mark Rogers, 1998. "A primer on short-term linkages between key economic data series," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 40-54. [Downloadable!]
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