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Nowcasting GDP: Electronic Payments, Data Vintages and the Timing of Data Releases

  • John Galbraith
  • Greg Tkacz

We describe and assess the usefulness of a newly-constructed database of electronic payments, comprised of debit and credit card transactions as well cheques that clear through the banking system, as indicators of current GDP growth. Apart from capturing a broad range of spending activity, these variables are available on a very timely basis, thereby making them suitable candidate indicators. Controlling both for the release dates of various variables and the vintage of GDP available to analysts at the time a nowcast is produced, we generate nowcasts of GDP growth for a given quarter over a span of five months, which is the period over which interest in nowcasts would exist. We find that nowcast errors fall by about 60 per cent between the first and final nowcast. Evidence on the value of the additional payments variables is mixed, however; the point estimates suggest reductions in forecast loss at some nowcast horizons, but with considerable variability.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2013s-25.

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Length: 39 pages
Date of creation: 01 Aug 2013
Date of revision:
Handle: RePEc:cir:cirwor:2013s-25
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  1. Giannone, Domenico & Reichlin, Lucrezia & Small, David, 2008. "Nowcasting: The real-time informational content of macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 665-676, May.
  2. Bruce E. Hansen, 2007. "Least Squares Model Averaging," Econometrica, Econometric Society, vol. 75(4), pages 1175-1189, 07.
  3. Carlos Arango & Kim Huynh & Leonard Sabetti, 2011. "How Do You Pay? The Role of Incentives at the Point-of-Sale," Working Papers 11-23, Bank of Canada.
  4. Maximo Camacho & Gabriel Perez-Quiros, 2010. "Introducing the euro-sting: Short-term indicator of euro area growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 663-694.
  5. Venkatesh Shankar & Ruth N. Bolton, 2004. "An Empirical Analysis of Determinants of Retailer Pricing Strategy," Marketing Science, INFORMS, vol. 23(1), pages 28-49, May.
  6. Galbraith, John W. & Hodgson, Douglas J., 2012. "Dimension reduction and model averaging for estimation of artists' age-valuation profiles," European Economic Review, Elsevier, vol. 56(3), pages 422-435.
  7. Todd E. Clark & Michael W. McCracken, 2008. "Tests of equal predictive ability with real-time data," Working Papers 2008-029, Federal Reserve Bank of St. Louis.
  8. Burstein, Ariel Tomas & Eichenbaum, Martin & Rebelo, Sérgio, 2004. "Large Devaluations and the Real Exchange Rate," CEPR Discussion Papers 4810, C.E.P.R. Discussion Papers.
  9. Luis C. Nunes, 2005. "Nowcasting quarterly GDP growth in a monthly coincident indicator model," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 24(8), pages 575-592.
  10. Andreou, Elena & Ghysels, Eric & Kourtellos, Andros, 2010. "Regression models with mixed sampling frequencies," Journal of Econometrics, Elsevier, vol. 158(2), pages 246-261, October.
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