The use and abuse of 'real-time' data in economic forecasting

Dolmas, Sheila; Koenig, Evan F.; Piger, Jeremy M.

Working Paper

The use and abuse of 'real-time' data in economic forecasting

Abstract: We distinguish between three different ways of using real-time data to estimate forecasting equations and argue that the most popular approach should generally be avoided. The point is illustrated with a model that uses monthly industrial production, employment, and retail sales data to predict real GDP growth. When the model is estimated using our preferred method, its out-of-sample forecasting performance is superior to that obtained using conventional estimation and compares favorably with that of the Blue-Chip consensus.

Keywords: Forecasting; economic conditions - United States;

Status: Published in Review of Economics and Statistics, August 2003, 85(3), pp. 618-28