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Do provisional estimates of output miss economic turning points?

  • Karen E. Dynan
  • Douglas Elmendorf

Initial estimates of aggregate output and its components are based on very incomplete source data, so they may not fully capture shifts in economic conditions. In particular, if those estimates are based partly on trends in preceding quarters, provisional estimates may overstate activity when actual output is decelerating and understate it when actual output is accelerating. We examine this issue using the Real Time Data Set for Macroeconomists, which contains contemporaneous estimates of GNP or GDP and its components beginning in the late 1960s, as well as financial-market information and other data. We find that provisional estimates tend to partially miss accelerations and decelerations. We also consider whether better use of contemporaneous data could improve the quality of provisional estimates. We find that provisional estimates do not represent optimal forecasts of the current estimates, but that the improvement in forecast quality from including additional data appears to be quite small.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2001-52.

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Date of creation: 2001
Date of revision:
Handle: RePEc:fip:fedgfe:2001-52
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  8. Mork, Knut Anton, 1987. "Ain't Behavin': Forecast Errors and Measurement Errors in Early GNP Estimates," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 165-75, April.
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  12. Charles L. Evans, 1998. "Real-time Taylor rules and the federal funds futures market," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 44-55.
  13. Karl Whelan, 2000. "A guide to the use of chain aggregated NIPA data," Open Access publications 10197/253, School of Economics, University College Dublin.
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