Discussion paper

DP15926 Advances in Nowcasting Economic Activity: Secular Trends, Large Shocks and New Data

A key question for households, firms, and policy makers is: how is the economy doing now? We develop a Bayesian dynamic factor model and compute daily estimates of US GDP growth. Our framework gives prominence to features of modern business cycles absent in linear Gaussian models, including movements in long-run growth, time-varying uncertainty, and fat tails. We also incorporate newly available high-frequency data on consumer behavior. The model beats benchmark econometric models and survey expectations at predicting GDP growth over two decades, and advances our understanding of macroeconomic data during the recession of spring 2020.

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Citation

Antolin-Diaz, J, T Drechsel and I Petrella (eds) (2021), “DP15926 Advances in Nowcasting Economic Activity: Secular Trends, Large Shocks and New Data”, CEPR Press Discussion Paper No. 15926. https://new.cepr.org/publications/dp15926