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

50 Pages Posted: 5 Jan 2006

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: May 2006

Abstract

This paper formalizes the process of updating the nowcast and forecast on out-put 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 inflation while GDP is only affected by real variables and interest rates.

Keywords: Forecasting, monetary policy, factor model, real time data, large data sets, news

JEL Classification: E52, C33, C53

Suggested Citation

Giannone, Domenico and Reichlin, Lucrezia and Small, David H., Nowcasting GDP and Inflation: The Real-Time Informational Content of Macroeconomic Data Releases (May 2006). ECB Working Paper No. 633; FEDs Working Paper No. 2005-42. Available at SSRN: https://ssrn.com/abstract=873658

Domenico Giannone (Contact Author)

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

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Centre for Economic Policy Research (CEPR)

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Lucrezia Reichlin

London Business School ( email )

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

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European Central Bank (ECB) ( email )

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David H. Small

Federal Reserve Board - Monetary Studies Section ( email )

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Washington, DC 20551
United States

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