Keywords: Forecasting, monetary policy, factor model, real time data, large data sets, news
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 inflation, while GDP is affected only by real variables and interest rates.
Full paper (421 KB PDF)
Home | FEDS | List of 2005 FEDS papers
To comment on this site, please fill out our feedback form.
Last update: October 6, 2005