Reconciled Estimates of Monthly GDP in the US

73 Pages Posted: 12 Jan 2022

See all articles by Gary Koop

Gary Koop

University of Strathclyde, Glasgow - Strathclyde Business School - Department of Economics

Stuart G. McIntyre

University of Strathclyde

James Mitchell

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Aubrey Poon

University of Strathclyde - Centre for Applied Macroeconomic Analysis

Date Written: January 11, 2022

Abstract

In the US, income and expenditure-side estimates of GDP (GDPI and GDPE) measure "true" GDP with error and are available at a quarterly frequency. Methods exist for using these proxies to produce reconciled quarterly estimates of true GDP. In this paper, we extend these methods to provide reconciled historical true GDP estimates at a monthly frequency. We do this using a Bayesian mixed frequency vector autoregression (MF-VAR) involving GDPE, GDPI, unobserved true GDP, and monthly indicators of short-term economic activity. Our MF-VAR imposes restrictions that reflect a measurement-error perspective (that is, the two GDP proxies are assumed to equal true GDP plus measurement error). Without further restrictions, our model is unidentified. We consider a range of restrictions that allow for point and set identification of true GDP and show that they lead to informative monthly GDP estimates. We illustrate how these new monthly data contribute to our historical understanding of business cycles and we provide a real-time application nowcasting monthly GDP over the pandemic recession.

Keywords: Mixed frequency; Vector autoregressions; Bayesian methods; Nowcasting; Business cycles; National accounts.

JEL Classification: C32, E01, E32

Suggested Citation

Koop, Gary and McIntyre, Stuart G. and Mitchell, James and Poon, Aubrey, Reconciled Estimates of Monthly GDP in the US (January 11, 2022). FRB of Cleveland Working Paper No. 22-01, Available at SSRN: https://ssrn.com/abstract=4006477 or http://dx.doi.org/10.2139/ssrn.4006477

Gary Koop

University of Strathclyde, Glasgow - Strathclyde Business School - Department of Economics ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom

Stuart G. McIntyre

University of Strathclyde

16 Richmond Street
Glasgow 1XQ, G1 1XQ
United Kingdom

James Mitchell (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

HOME PAGE: http://https://www.clevelandfed.org/en/our-research/economists/james-mitchell.aspx

Aubrey Poon

University of Strathclyde - Centre for Applied Macroeconomic Analysis ( email )

16 Richmond Street
Glasgow 1XQ, Scotland
United Kingdom

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