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What Can We Learn from Comprehensive Data Revisions for Forecasting Inflation: Some US Evidence

The empirical properties of benchmark revisions to key U.S. macroeconomic aggregates are examined. News versus noise impact of revisions is interpreted via the cointegration property of successive benchmark revisions. Cointegration breaks in the last two years before a benchmark revision. Hence, we conclude that there is some information content in benchmark revisions. The last point is illustrated by reporting that inflation forecasts could be improved by the addition of a time series that reflects benchmark revisions to real GDP. Standard backward and forward-looking Phillips curves are used to explore the statistical significance of benchmark revisions.

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File URL: http://www.wlu.ca/documents/22950/CompDataRev_Dec_2006.pdf
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Paper provided by Wilfrid Laurier University, Department of Economics in its series Working Papers with number eg0049.

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Length: 42
Date of creation: 2006
Date of revision: 2006
Handle: RePEc:wlu:wpaper:eg0049
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  1. Orphanides, Athanasios & van Norden, Simon, 2005. "The Reliability of Inflation Forecasts Based on Output Gap Estimates in Real Time," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(3), pages 583-601, June.
  2. Croushore, Dean & Evans, Charles L., 2006. "Data revisions and the identification of monetary policy shocks," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1135-1160, September.
  3. D. W. K. Andrews, 2003. "End-of-Sample Instability Tests," Econometrica, Econometric Society, vol. 71(6), pages 1661-1694, November.
  4. Anthony Garratt & Shaun P Vahey, 2005. "UK Real-Time Macro Data Characteristics," Birkbeck Working Papers in Economics and Finance 0502, Birkbeck, Department of Economics, Mathematics & Statistics.
  5. Siklos, P.L. & Granger, C.W.J., 1997. "Regime Sensitive Cointegration with an Application to Interest rate Parity," Working Papers 97-5, Wilfrid Laurier University, Department of Economics.
  6. Bernanke, Ben S. & Boivin, Jean, 2003. "Monetary policy in a data-rich environment," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 525-546, April.
  7. Sharon Kozicki, 2004. "How do data revisions affect the evaluation and conduct of monetary policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 5-38.
  8. Hall, Alastair R., 2004. "Generalized Method of Moments," OUP Catalogue, Oxford University Press, number 9780198775201.
  9. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
  10. Golinelli, Roberto & Parigi, Giuseppe, 2005. "Short-Run Italian GDP Forecasting and Real-Time Data," CEPR Discussion Papers 5302, C.E.P.R. Discussion Papers.
  11. Athanasios Orphanides, 2001. "Monetary Policy Rules Based on Real-Time Data," American Economic Review, American Economic Association, vol. 91(4), pages 964-985, September.
  12. Donald W.K. Andrews & Jae-Young Kim, 2004. "End-of-Sample Cointegration Breakdown Tests," Yale School of Management Working Papers ysm344, Yale School of Management.
  13. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
  14. 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.
  15. repec:cup:macdyn:v:1:y:1997:i:3:p:640-57 is not listed on IDEAS
  16. repec:cup:cbooks:9780521780254 is not listed on IDEAS
  17. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-29, October.
  18. Joseph A. Ritter, 2000. "Feeding the national accounts," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 11-20.
  19. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-60, August.
  20. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  21. David E. Runkle, 1998. "Revisionist history: how data revisions distort economic policy research," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 3-12.
  22. Herrmann, Heinz & Orphanides, Athanasios & Siklos, Pierre L., 2005. "Real-time data and monetary policy," The North American Journal of Economics and Finance, Elsevier, vol. 16(3), pages 271-276, December.
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