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

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  • Evan Koenig
  • Sheila Dolmas
  • Jeremy M. Piger

Abstract

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

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2001-015.

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Date of creation: 2002
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Publication status: Published in Review of Economics and Statistics, August 2003, 85(3), pp. 618-28
Handle: RePEc:fip:fedlwp:2001-015

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Keywords: Forecasting ; Economic conditions - United States;

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  1. Robert Ingenito & Bharat Trehan, 1996. "Using monthly data to predict quarterly output," Economic Review, Federal Reserve Bank of San Francisco, pages 3-11.
  2. 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.
  3. 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.).
  4. Orphanides, Athanasios, 1999. "The Quest for Prosperity Without Inflation," Working Paper Series 93, Sveriges Riksbank (Central Bank of Sweden).
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  8. Owen Lamont, 1995. "Macroeconomics Forecasts and Microeconomic Forecasters," NBER Working Papers 5284, National Bureau of Economic Research, Inc.
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  10. Norman R. Swanson & Halbert White, 1995. "A Model Selection Approach to Real-Time Macroeconomic Forecasting Using Linear Models and Artificial Neural Networks," Macroeconomics 9503004, EconWPA.
  11. Preston J. Miller & Daniel M. Chin, 1996. "Using monthly data to improve quarterly model forecasts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 16-33.
  12. Swanson Norman, 1996. "Forecasting Using First-Available Versus Fully Revised Economic Time-Series Data," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(1), pages 1-20, April.
  13. Francis X. Diebold & Glenn D. Rudebusch, 1989. "Forecasting output with the composite leading index: an ex ante analysis," Finance and Economics Discussion Series 90, Board of Governors of the Federal Reserve System (U.S.).
  14. Ehrbeck, Tilman & Waldmann, Robert, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 21-40, February.
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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.
  17. Bharat Trehan, 1989. "Forecasting growth in current quarter real GNP," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 39-52.
  18. John C. Robertson & Ellis W. Tallman, 1998. "Data vintages and measuring forecast model performance," Economic Review, Federal Reserve Bank of Atlanta, issue Q 4, pages 4-20.
  19. David Laster & Paul Bennett & In Sun Geoum, 1999. "Rational Bias In Macroeconomic Forecasts," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 293-318, February.
  20. 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.
  21. Braun, Steven N, 1990. "Estimation of Current-Quarter Gross National Product by Pooling Preliminary Labor-Market Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 293-304, July.
  22. 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.
  23. 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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