FRB: Real-Time Measurement of Business Conditions

International Finance Discussion Papers

Real-Time Measurement of Business Conditions
S. Boragan Aruoba, Francis X. Diebold, and Chiara Scotti
2007-901 (August 2007)

Abstract: We construct a framework for measuring economic activity in real time (e.g., minute-by-minute), using a variety of stock and flow data observed at mixed frequencies. Specifically, we propose a dynamic factor model that permits exact filtering, and we explore the efficacy of our methods both in a simulation study and in a detailed empirical example.

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Keywords
Business cycle, expansion, recession, state space model, macroeconomic forecasting, dynamic factor model

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Last update: September 18, 2007