Can the Income-Expenditure Discrepancy Improve Forecasts?

James Aylward, Kevin Lansing and Tim Mahedy

FRBSF Economic Letter, 2018

Abstract: Gross domestic income and gross domestic product?GDI and GDP?measure aggregate economic activity using income and expenditure data, respectively. Discrepancies between the initial estimates of quarterly growth rates for these two measures appear to have some predictive power for subsequent GDP revisions. However, this power has weakened considerably since 2011. Similarly, the first revision to GDP growth has less predictive power in forecasting subsequent revisions since 2011. One possible explanation is that evolving data collection and estimation methods have helped improve initial GDP and GDI estimates.

Date: 2018
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