Justin Irving's real-time US NGDP indicator

Justin Irving's real-time US NGDP indicator
For some time I have wanted to write about a couple of extremely interesting blog posts by Justin Irving on his excellent blog Economic Sophism. In three blog posts (here, here and here) Justin has explained how he has estimated a real-time model for next year's US NGDP growth. I  don't want to get into details of Justin method, but overall Justin is using so-called Principal Component Analysis to identify a common "trend" in different financial asset prices to estimate a real-time forecast for expectations for next year's US NGDP. The graph below shows a week of data for US NGDP expectations according to Justin's model. As far as I know Justin's model produces new forecasts every three-minutes. That of course provides analysts, commentators, reporters and policy makers with an extremely interesting tool. Just imagine how the tool can be used during a FOMC meeting. First how will the indicator react when a policy decision is announced? And then later during Ben Bernanke's Q&E session. We will actually be able to in real-time to evaluate whether Bernanke's comments and guidance is tightening or easing monetary conditions. So I certainly hope that Justin will make the real-time available during the next FOMC meeting. Maybe Justin should be tweeting real-time during the next FOMC meeting and Bernanke's Q&E? Otherwise I will do it...(btw you find me on Twiiter here) PS I have earlier suggested using market data to estimate NGDP expectations in the US. See my blog post "Markets are telling us where NGDP growth is heading"


WORLD LEADING ADVISORY SPECIALISING IN THIS TOPIC

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