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

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Author Info
Evan Koenig
Sheila Dolmas
Jeremy M. 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 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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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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dean Croushore & Tom Stark, 2002. "Is macroeconomic research robust to alternative data sets?," Working Papers 02-3, Federal Reserve Bank of Philadelphia. [Downloadable!]
  2. Fred Joutz & Michael P. Clements & Herman O. Stekler, 2007. "An evaluation of the forecasts of the federal reserve: a pooled approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 121-136. [Downloadable!]
  3. N. Kundan Kishor & Evan F. Koenig, 2005. "VAR estimation and forecasting when data are subject to revision," Working Papers 05-01, Federal Reserve Bank of Dallas. [Downloadable!]
  4. Todd E. Clark & Michael W. McCracken, 2007. "Tests of equal predictive ability with real-time data," Research Working Paper RWP 07-06, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  5. Richard Harrison & George Kapetanios & Tony Yates, . "Forecasting with measurement errors in dynamic models," Bank of England working papers 237, Bank of England. [Downloadable!]
    Other versions:
  6. Clements, Michael P, 2006. "Internal consistency of survey respondents.forecasts : Evidence based on the Survey of Professional Forecasters," The Warwick Economics Research Paper Series (TWERPS) 772, University of Warwick, Department of Economics. [Downloadable!]
  7. Golinelli, Roberto & Parigi, Giuseppe, 2005. "Short-Run Italian GDP Forecasting and Real-Time Data," CEPR Discussion Papers 5302, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Evan F. Koenig, 2002. "Using the Purchasing Managers' Index to assess the economy's strength and the likely direction of monetary policy," Economic and Financial Policy Review, Federal Reserve Bank of Dallas. [Downloadable!]
  9. Dean Croushore & Tom Stark, 2000. "A real-time data set for macroeconomists: does data vintage matter for forecasting?," Working Papers 00-6, Federal Reserve Bank of Philadelphia. [Downloadable!]
  10. William T. Gavin & Kevin L. Kliesen, 2002. "Unemployment insurance claims and economic activity," Review, Federal Reserve Bank of St. Louis, issue May, pages 15-28. [Downloadable!]
  11. Anthony Garratt & Shaun P Vahey, 2005. "UK Real-Time Macro Data Characteristics," Birkbeck Working Papers in Economics and Finance 0502, Birkbeck, School of Economics, Mathematics & Statistics. [Downloadable!]
    Other versions:
  12. Tom Stark & Dean Croushore, 2001. "Forecasting with a real-time data set for macroeconomists," Working Papers 01-10, Federal Reserve Bank of Philadelphia. [Downloadable!]
    Other versions:
  13. Clements, Michael P & Harvey, David I, 2006. "Forecast Encompassing Tests and Probability Forecasts," The Warwick Economics Research Paper Series (TWERPS) 774, University of Warwick, Department of Economics. [Downloadable!]
  14. Carlo Altavilla & Matteo Ciccarelli, 2007. "Information combination and forecast (st)ability. Evidence from vintages of time-series data," Working Paper Series 846, European Central Bank. [Downloadable!]
  15. Clements, Michael P & Galvão, Ana Beatriz, 2006. "Macroeconomic Forecasting with Mixed Frequency Data : Forecasting US output growth and inflation," The Warwick Economics Research Paper Series (TWERPS) 773, University of Warwick, Department of Economics. [Downloadable!]
  16. Richard G. Anderson, 2006. "Replicability, real-time data, and the science of economic research: FRED, ALFRED, and VDC," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 81-93. [Downloadable!]
  17. Anthony Garratt & Gary Koop & Emi Mise & Shaun P Vahey, 2007. "Real-time Prediction with UK Monetary Aggregates in the Presence of Model Uncertainty," Birkbeck Working Papers in Economics and Finance 0714, Birkbeck, School of Economics, Mathematics & Statistics. [Downloadable!]
  18. Michael Ehrmann & Marcel Fratzscher, 2004. "Exchange rates and fundamentals - new evidence from real-time data," Working Paper Series 365, European Central Bank. [Downloadable!]
    Other versions:
  19. Dean Croushore & Tom Stark, 1999. "Does data vintage matter for forecasting?," Working Papers 99-15, Federal Reserve Bank of Philadelphia. [Downloadable!]
  20. Scott Schuh, 2001. "An evaluation of recent macroeconomic forecast errors," New England Economic Review, Federal Reserve Bank of Boston, pages 35-56. [Downloadable!]
  21. Kamada, Koichiro, 2004. "Real-Time Estimation of the Output Gap in Japan and its Usefulness for Inflation Forecasting and Policymaking," Discussion Paper Series 1: Economic Studies 2004,14, Deutsche Bundesbank, Research Centre. [Downloadable!]
  22. Orphanides, Athanasios & van Norden, Simon, 2005. "The Reliability of Inflation Forecasts Based on Output Gap Estimates in Real Time," CEPR Discussion Papers 4830, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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