Macroeconomic Nowcasting and Forecasting with Big Data

Brandyn Bok, Daniele Caratelli, Domenico Giannone, Argia Sbordone and Andrea Tambalotti
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Brandyn Bok: Federal Reserve Bank of New York, New York, New York 10045, USA

Annual Review of Economics, 2018, vol. 10, issue 1, 615-643

Abstract: Data, data, data…. Economists know their importance well, especially when it comes to monitoring macroeconomic conditions—the basis for making informed economic and policy decisions. Handling large and complex data sets was a challenge that macroeconomists engaged in real-time analysis faced long before so-called big data became pervasive in other disciplines. We review how methods for tracking economic conditions using big data have evolved over time and explain how econometric techniques have advanced to mimic and automate best practices of forecasters on trading desks, at central banks, and in other market-monitoring roles. We present in detail the methodology underlying the New York Fed Staff Nowcast, which employs these innovative techniques to produce early estimates of GDP growth, synthesizing a wide range of macroeconomic data as they become available.Data, data, data... Economists know their importance well, especially when it comes to monitoring macroeconomic conditions?the basis for making informed economic and policy decisions. Handling large and complex data sets was a challenge that macroeconomists engaged in real-time analysis faced long before so-called big data became pervasive in other disciplines. We review how methods for tracking economic conditions using big data have evolved over time and explain how econometric techniques have advanced to mimic and automate best practices of forecasters on trading desks, at central banks, and in other market-monitoring roles. We present in detail the methodology underlying the New York Fed Staff Nowcast, which employs these innovative techniques to produce early estimates of GDP growth, synthesizing a wide range of macroeconomic data as they become available.

Keywords: business cycle analysis; high-dimensional data; monitoring economic conditions; real-time data flow (search for similar items in EconPapers)
JEL-codes: C32 C53 C55 E32 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Macroeconomic Nowcasting and Forecasting with Big Data (2018)
Working Paper: Macroeconomic nowcasting and forecasting with big data (2017)
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