Nowcasting GDP and Inflation: The Real Time Informational Content of Macroeconomic Data Releases

47 Pages Posted: 25 Aug 2005

See all articles by Domenico Giannone

Domenico Giannone

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

Lucrezia Reichlin

London Business School; Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR); European Central Bank (ECB)

David H. Small

Federal Reserve Board - Monetary Studies Section

Multiple version iconThere are 2 versions of this paper

Date Written: August 2005

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

JEL Classification: C33, C53, E52

Suggested Citation

Giannone, Domenico and Reichlin, Lucrezia and Small, David H., Nowcasting GDP and Inflation: The Real Time Informational Content of Macroeconomic Data Releases (August 2005). CEPR Discussion Paper No. 5178. Available at SSRN: https://ssrn.com/abstract=790746

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

Lucrezia Reichlin (Contact Author)

London Business School ( email )

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Regent's Park
London, London NW1 4SA
United Kingdom

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4221 (Phone)
+32 2 650 4475 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

David H. Small

Federal Reserve Board - Monetary Studies Section ( email )

20th and C Streets, NW
Washington, DC 20551
United States

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