Reconciled Estimates of Monthly GDP in the United States. Issue 2 (3rd April 2023)

• Record Type: Journal Article
• Authors: Koop, Gary; McIntyre, Stuart; Mitchell, James; Poon, Aubrey
• Is Part Of: Journal of business & economic statistics. Volume 41:Issue 2(2023)
• Page Start: 563
• Page End: 577
• Publication Date: 2023-04-03
• Subjects: Bayesian methods -- Business cycles -- Mixed frequency -- National accounts -- Nowcasting -- Vector autoregressions; Economics -- Statistical methods -- Periodicals; Commercial statistics -- Periodicals; Économie politique -- Méthodes statistiques -- Périodiques; Statistique commerciale -- Périodiques; 330.015195
• DOI: 10.1080/07350015.2022.2044336
• Languages: English
• ISSNs: 0735-0015

Abstract

Abstract: In the United States, income and expenditure-side estimates of gross domestic product (GDP) (GDP I and GDP E ) measure "true" GDP with error and are available at a quarterly frequency. Methods exist for using these proxies to produce reconciled quarterly estimates of true GDP. In this paper, we extend these methods to provide reconciled historical true GDP estimates at a monthly frequency. We do this using a Bayesian mixed frequency vector autoregression (MF-VAR) involving GDP E, GDP I, unobserved true GDP, and monthly indicators of short-term economic activity. Our MF-VAR imposes restrictions that reflect a measurement-error perspective (i.e., the two GDP proxies are assumed to equal true GDP plus measurement error). Without further restrictions, our model is unidentified. We consider a range of restrictions that allow for point and set identification of true GDP and show that they lead to informative monthly GDP estimates. We illustrate how these new monthly data contribute to our historical understanding of business cycles and we provide a real-time application nowcasting monthly GDP over the pandemic recession.