TITLE

Real-Time Forecasting in Practice

AUTHOR(S)
Kitchen, John; Monaco, Ralph
PUB. DATE
October 2003
SOURCE
Business Economics;Oct2003, Vol. 38 Issue 4, p10
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This paper outlines a method for making effective use of monthly indicators to develop a current-quarter CDP forecast. Estimates and projections of real CDP growth are usually used to describe how the economy is doing. But estimates of CDP are only available quarterly, and the first CDP estimate for a quarter is released late in the month following the end of the quarter. The lack of a timely, comprehensive economic picture may mean that policymakers and business planners may be as much as four months behind in recognizing a significant slowdown or acceleration in the economy. This problem is especially important around business cycle peaks or troughs, where there may be some evidence that the economy is changing direction. There are many less-comprehensive, but higher-frequency data series about the economy, however. The chief difficulty with using the multiple indicators is that different indicators can give different signals, and there is no agreed-upon way for aggregating the statistics to give a single-valued answer. In this paper, we describe the approach we have adopted at the Treasury Department to use a broad variety of high-frequency incoming data to construct "real-time" estimates of quarterly real CDP growth. We draw on the recent work by Stock and Watson and others and describe the indicators, the techniques, and the recent performance of the system.
ACCESSION #
11751139

 

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