Assessing Macro Uncertainty in Real-Time When Data are Subject to Revision
27 Pages Posted: 11 Jan 2015
Date Written: January 6, 2015
Abstract
Model-based estimates of future uncertainty are generally based on the in-sample fit of the model, as when Box-Jenkins prediction intervals are calculated. However, this approach will generate biased uncertainty estimates in real time when there are data revisions. A simple remedy is suggested, and used to generate more accurate prediction intervals for 25 macroeconomic variables, in line with the theory. A simulation study based on an empirically-estimated model of data revisions for US output growth is used to investigate small-sample properties.
Keywords: in-sample uncertainty, out-of-sample uncertainty, real-time-vintage estimation
JEL Classification: C53
Suggested Citation: Suggested Citation