Macroeconomic Nowcasting and Forecasting with Big Data

38 Pages Posted: 22 Nov 2017

See all articles by Brandyn Bok

Brandyn Bok

Federal Reserve Banks - Federal Reserve Bank of New York

Daniele Caratelli

Federal Reserve Banks - Federal Reserve Bank of New York

Domenico Giannone

Federal Reserve Banks - Federal Reserve Bank of New York; Centre for Economic Policy Research (CEPR)

Argia M. Sbordone

Federal Reserve Bank of New York

Andrea Tambalotti

Federal Reserve Bank of New York

Multiple version iconThere are 3 versions of this paper

Date Written: 2017-11-01

Abstract

Data, data, data . . . Economists know it well, especially when it comes to monitoring macroeconomic conditions—the basis for making informed economic and policy decisions. Handling large and complex data sets was a challenge that macroeconomists engaged in real-time analysis faced long before “big data” became pervasive in other disciplines. We review how methods for tracking economic conditions using big data have evolved over time and explain how econometric techniques have advanced to mimic and automate the best practices of forecasters on trading desks, at central banks, and in other market-monitoring roles. We present in detail the methodology underlying the New York Fed Staff Nowcast, which employs these innovative techniques to produce early estimates of GDP growth, synthesizing a wide range of macroeconomic data as they become available.

Keywords: monitoring economic conditions, business cycle, macroeconomic data, large data sets, high-dimensional data, real-time data flow, factor model, state space models, Kalman filter

JEL Classification: C32, C53, C55, E32

Suggested Citation

Bok, Brandyn and Caratelli, Daniele and Giannone, Domenico and Sbordone, Argia M. and Tambalotti, Andrea, Macroeconomic Nowcasting and Forecasting with Big Data (2017-11-01). FRB of NY Staff Report No. 830. Available at SSRN: https://ssrn.com/abstract=3075844

Brandyn Bok (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York

Daniele Caratelli

Federal Reserve Banks - Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

Domenico Giannone

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Argia M. Sbordone

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Andrea Tambalotti

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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