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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

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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File URL: http://www.federalreserve.gov/pubs/ifdp/2000/684/ifdp684.pdf
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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 684.

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Date of creation: 2000
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Handle: RePEc:fip:fedgif:684

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Keywords: Forecasting ; Economic conditions - United States;

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  1. Orphanides, Athanasios, 2003. "The quest for prosperity without inflation," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 633-663, April.
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  17. 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.
  18. Swanson, N.R., 1996. "Forecasting Using First Available Versus Fully Revised Economic Time Series data," Papers 4-96-7, Pennsylvania State - Department of Economics.
  19. 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.
  20. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
  21. Stephen K. McNees, 1987. "Consensus forecasts: tyranny of the majority?," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 15-21.
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