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On Functions, Quality, and Timeliness of Economic Information

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  • Victor Zarnowitz
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    Abstract

    The flow of production and use of economic information consists of the collection and processing of primary data, the reporting of the resulting measures, and the transformation of the latter into signals or messages that presumably aid knowledge or decision-making. Each stage contributes to the return and costs, quality and errors of the information. The processes involved on the micro and macro levels show important similarities and interact ions. The uncertainty about economic information increases with the probability of error in the underlying data and their processing and interpretation. Many errors cannot be promptly detected and eliminated but can be gradually reduced over time, as attested by the revisions in economic statistics. This paper presents substantial evidence on the accuracy of provisional estimates of quarterly and monthly changes in eighteen important variables. Measures of several aspects of data quality and of average lags of data release and signal detection are provided for a collection of 110 widely used economic indicators. These materials help identify the location of the more serious measurement errors by variable and period, and they show that informational lags of five and more months are frequent. The errors and lags of information may lead to apparently "systematic" but not readily detectable and removable errors in expectations. This is likely to happen, in particular, in times of great surprises and shocks when measurement of short-term changes in the economy is most difficult and current signals are often misread. Some illustrations are drawn from the events of 1970-75.

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    File URL: http://www.nber.org/papers/w0608.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0608.

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    Date of creation: Dec 1980
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    Publication status: published as Zarnowitz, Victor. "On Functions, Quality, and Timeliness of Economic Information." The Journal of Business, Vol. 55, No. 1, (January 1982), pp. 87-11 9.
    Handle: RePEc:nbr:nberwo:0608

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    1. Thomas J. Sargent & Christopher A. Sims, 1977. "Business cycle modeling without pretending to have too much a priori economic theory," Working Papers 55, Federal Reserve Bank of Minneapolis.
    2. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    3. Laidler, David E W & Parkin, J Michael, 1975. "Inflation: A Survey," Economic Journal, Royal Economic Society, vol. 85(340), pages 741-809, December.
    4. Gordon, Robert Aaron, 1976. "Rigor and Relevance in a Changing Institutional Setting," American Economic Review, American Economic Association, vol. 66(1), pages 1-14, March.
    5. Hirshleifer, Jack, 1973. "Where Are We in the Theory of Information?," American Economic Review, American Economic Association, vol. 63(2), pages 31-39, May.
    6. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
    7. Hall, Robert E., 1980. "Labor supply and aggregate fluctuations," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 12(1), pages 7-33, January.
    8. Rosanne Cole, 1969. "Errors In Provisional Estimates Of Gross National Product," NBER Books, National Bureau of Economic Research, Inc, number cole69-1, May.
    9. Rendigs Fels & C. Elton Hinshaw, 1968. "Forecasting and Recognizing Business Cycle Turning Points," NBER Books, National Bureau of Economic Research, Inc, number fels68-1, May.
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    Cited by:
    1. Verónica Cañal-Fernández, 2012. "Accuracy and reliability of Spanish regional accounts (CRE-95)," Empirical Economics, Springer, vol. 43(3), pages 1299-1320, December.
    2. Jeffrey A. Frankel, 1988. "Obstacles to International Macroeconomic Policy Coordination," NBER Working Papers 2505, National Bureau of Economic Research, Inc.
    3. Victor Zarnowitz, 1983. "Rational Expectations and Macroeconomic Forecasts," NBER Working Papers 1070, National Bureau of Economic Research, Inc.
    4. Dean Croushore, 2008. "Frontiers of real-time data analysis," Working Papers 08-4, Federal Reserve Bank of Philadelphia.
    5. Robert H. McGuckin & Ataman Ozyildirim & Victor Zarnowitz, 2001. "The Composite Index of Leading Economic Indicators: How to Make It More Timely," NBER Working Papers 8430, National Bureau of Economic Research, Inc.
    6. Victor Zarnowitz & Geoffrey H. Moore, 1986. "Forecasting Recessions Under the Gramm-Rudman-Hollings Law," NBER Working Papers 2066, National Bureau of Economic Research, Inc.
    7. Tara M. Sinclair & H.O. Stekler, 2011. "Differences in Early GDP Component Estimates Between Recession and Expansion," Working Papers 2011-05, The George Washington University, Institute for International Economic Policy.
    8. Tara M. Sinclair & H.O. Stekler, 2011. "Examining the Quality of Early GDP Component Estimates," Working Papers 2011-001, The George Washington University, Department of Economics, Research Program on Forecasting, revised Dec 2011.
    9. Victor Zarnowitz & Louis A. Lambros, 1983. "Consensus and Uncertainty in Economic Prediction," NBER Working Papers 1171, National Bureau of Economic Research, Inc.
    10. Victor Zarnowitz, 1982. "Expectations and Forecasts from Business Outlook Surveys," NBER Working Papers 0845, National Bureau of Economic Research, Inc.

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