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Nowcasting GDP and inflation: The real time informational content of macroeconomic data releases

Journal

Journal of Monetary Economics

Subject

Economics

Publishing details

Journal of Monetary Economics 2008 May Vol 55:4 p 665-676

Authors / Editors

Reichlin L;Giannone D;Small D

Biographies

Lucrezia Reichlin

Publication Year

2008

Abstract

This paper formalizes the process of updating the nowcast and forecast on output and inflation as new releases of data become available. The marginal contribution of a particular release for the value of the signal and its precision is evaluated by computing 'news' on the basis of an evolving conditioning information set. The marginal contribution is then split into what is due to timeliness of information and what is due to economic content. We find that the Federal Reserve Bank of Philadelphia surveys have a large marginal impact on the nowcast of both inflation variables and real variables and this effect is larger than that of the Employment Report. When we control for timeliness of the releases, the effect of hard data becomes sizeable. Prices and quantities affect the precision of the estimates of GDP while inflation is only affected by nominal variables and asset prices.

Keywords

Forecasting, monetary policy, factor model, real time data, large datasets, news

Available on ECCH

No


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