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Working Paper
Time-varying Uncertainty of the Federal Reserve’s Output Gap Estimate
Berge, Travis J. (2020-02-03)
What is the output gap and when do we know it? A factor stochastic volatility model estimates the common component to forecasts of the output gap produced by the staff of the Federal Reserve, its time-varying volatility, and time-varying, horizon-specific forecast uncertainty. The common factor to these forecasts is highly procyclical, and unexpected increases to the common factor are associated with persistent responses in other macroeconomic variables. However, output gap estimates are very uncertain, even well after the fact. Output gap uncertainty increases around business cycle turning ...
Finance and Economics Discussion Series , Paper 2020-012

Working Paper
The Accuracy of Forecasts Prepared for the Federal Open Market Committee
Hanson, Tyler J.; Chang, Andrew C. (2015-07-09)
We analyze forecasts of consumption, nonresidential investment, residential investment, government spending, exports, imports, inventories, gross domestic product, inflation, and unemployment prepared by the staff of the Board of Governors of the Federal Reserve System for meetings of the Federal Open Market Committee from 1997 to 2008, called the Greenbooks. We compare the root mean squared error, mean absolute error, and the proportion of directional errors of Greenbook forecasts of these macroeconomic indicators to the errors from three forecasting benchmarks: a random walk, a first-order ...
Finance and Economics Discussion Series , Paper 2015-62

Journal Article
Real-time forecast averaging with ALFRED
McCracken, Michael W.; Banternghansa, Chanont (2011-01)
This paper presents empirical evidence on the efficacy of forecast averaging using the ALFRED (ArchivaL Federal Reserve Economic Data) real-time database. We consider averages over a variety of bivariate vector autoregressive models. These models are distinguished from one another based on at least one of the following factors: (i) the choice of variables used as predictors, (ii) the number of lags, (iii) use of all available data or only data after the Great Moderation, (iv) the observation window used to estimate the model parameters and construct averaging weights, and (v) for the forecast ...
Review , Volume 93 , Issue Jan , Pages 49-66

Working Paper
Forecasting Economic Activity with Mixed Frequency Bayesian VARs
Brave, Scott; Butters, R. Andrew; Justiniano, Alejandro (2016-05-20)
Mixed frequency Bayesian vector autoregressions (MF-BVARs) allow forecasters to incorporate a large number of mixed frequency indicators into forecasts of economic activity. This paper evaluates the forecast performance of MF-BVARs relative to surveys of professional forecasters and investigates the influence of certain specification choices on this performance. We leverage a novel real-time dataset to conduct an out-of-sample forecasting exercise for U.S. real gross domestic product (GDP). MF-BVARs are shown to provide an attractive alternative to surveys of professional forecasters for ...
Working Paper Series , Paper WP-2016-5

Working Paper
Forecasting Consumption Spending Using Credit Bureau Data
Croushore, Dean; Wilshusen, Stephanie M. (2020-06-04)
This paper considers whether the inclusion of information contained in consumer credit reports might improve the predictive accuracy of forecasting models for consumption spending. To investigate the usefulness of aggregate consumer credit information in forecasting consumption spending, this paper sets up a baseline forecasting model. Based on this model, a simulated real-time, out-of-sample exercise is conducted to forecast one-quarter ahead consumption spending. The exercise is run again after the addition of credit bureau variables to the model. Finally, a comparison is made to test ...
Working Papers , Paper 20-22

Working Paper
Do GDP Forecasts Respond Efficiently to Changes in Interest Rates?
Croushore, Dean; Marsten, Katherine (2016-06-22)
In this paper, we examine and extend the results of Ball and Croushore (2003) and Rudebusch and Williams (2009), who show that the output forecasts in the Survey of Professional Forecasters (SPF) are inefficient. Ball and Croushore show that the SPF out-put forecasts are inefficient with respect to changes in monetary policy, as measured by changes in real interest rates, while Rudebusch and Williams show that the forecasts are inefficient with respect to the yield spread. In this paper, we investigate the robustness of both claims of inefficiency, using real-time data and exploring the ...
Working Papers , Paper 16-17

Journal Article
The mismeasured personal saving rate is still useful: using real-time data to improve forecasting
Nakamura, Leonard I. (2008-10)
People make decisions based on information. Often, with hindsight, they could have made better choices. Economics faces a similar problem: Economic data, when first released, are often inaccurate and may subsequently be revised. In "The Mismeasured Personal Saving Rate Is Still Useful: Using Real-Time Data to Improve Forecasting," Leonard Nakamura uses the U.S. personal saving rate - a statistic that has often been initially low, then substantially revised upward - to discuss how modern economic statistical techniques can improve forecasting.
Business Review , Issue Q4 , Pages 9-20

Working Paper
Implications of real-time data for forecasting and modeling expectations
Kozicki, Sharon (2001)
This note extends the analysis in Stark and Croushore (2001) with an emphasis on the importance of data vintage for survey forecasts and modeling expectations. For both of these types of empirical exercises, results suggest that the choice of latest available or real-time data is critical for variables subject to large level revisions, but almost irrelevant for variables subject to only small revisions. Other forecasting practices were examined, with some surprising results.
Research Working Paper , Paper RWP 01-12

Working Paper
Combining Survey Long-Run Forecasts and Nowcasts with BVAR Forecasts Using Relative Entropy
Zaman, Saeed; Tallman, Ellis W. (2018-06-22)
This paper constructs hybrid forecasts that combine both short- and long-term conditioning information from external surveys with forecasts from a standard fixed-coefficient vector autoregression (VAR) model. Specifically, we use relative entropy to tilt one-step ahead and long-horizon VAR forecasts to match the nowcast and long-horizon forecast from the Survey of Professional Forecasters. The results indicate meaningful gains in multi-horizon forecast accuracy relative to model forecasts that do not incorporate long-term survey conditions. The accuracy gains are achieved for a range of ...
Working Papers (Old Series) , Paper 1809

Report
Forecasting through the rear-view mirror: data revisions and bond return predictability
Ghysels, Eric; Moench, Emanuel; Horan, Casidhe (2012)
Real-time macroeconomic data reflect the information available to market participants, whereas final data?containing revisions and released with a delay?overstate the information set available to them. We document that the in-sample and out-of-sample Treasury return predictability is significantly diminished when real-time as opposed to revised macroeconomic data are used. In fact, much of the predictive information in macroeconomic time series is due to the data revision and publication lag components.
Staff Reports , Paper 581

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