EconPapers    
Economics at your fingertips  
 

Monitoring Economic Activity in Real Time Using Diffusion Indices: Evidence from the Fifth District

Santiago Pinto (), Sonya Ravindranath Waddell and Pierre Daniel Sarte ()
Additional contact information
Sonya Ravindranath Waddell: Federal Reserve Bank of Richmond

Economic Quarterly, 2015, issue 4Q, 275-301

Abstract: We provide an analysis that parses out the conditions under which diffusion indices based on disaggregated information are informative about overall economic activity. Building on work by Pinto, Sarte, and Sharp (2015), we highlight the fact that diffusion indices, appropriately scaled, capture contributions of changes in the extensive margin -- e.g. how many sectors are growing or declining rather than by how much individual sectors are growing or declining -- to aggregate growth. In the Fifth Federal Reserve District, for example, this margin captures the bulk of variations in aggregate employment growth. We then show that the Fifth District employment index, produced in real time using firm-level surveys, closely tracks a synthetic diffusion index constructed ex post using observed data. However, we also underscore that diffusion indices have their limitations. In the Fifth District, for example, the growth rate of average wages (relative to its mean) is frequently of a sign opposite to that indicated by changes in the extensive margin. Finally, we explore some of the implications of producing diffusion indices at a more localized level.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://www.richmondfed.org/-/media/richmondfedorg ... 015/q4/pdf/sarte.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedreq:00038

Ordering information: This journal article can be ordered from
http://www.richmondfed.org/publications/

DOI: 10.21144/eq1010401

Access Statistics for this article

More articles in Economic Quarterly from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().

 
Page updated 2019-07-21
Handle: RePEc:fip:fedreq:00038