Working Paper: CEPR ID: DP4627
Authors: Marlene Amstad; Andreas M. Fischer
Abstract: The timely release of macroeconomic data imposes a distinct structure on the panel: the clustering and sequential ordering of real and nominal variables. We call this orderly release of economic data sequential information flow. The ordered panel generates a new class of restrictions that are helpful in interpreting the real-time estimates of monthly core inflation through the identification of turning points and structural shocks. After establishing the sought-after properties (of smoothness, stability, and forecasting) for core inflation, we turn to the discussion of real-time diagnosis for a low inflation environment. This is done in the context of weekly estimates of Swiss inflation. The intra-monthly estimates for core inflation find that it is worthwhile to update this measure at least twice a month.
Keywords: Common factors; Inflation; Sequential information flow
JEL Codes: E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| timely release of macroeconomic data (C82) | structures the panel of real and nominal variables (C51) |
| structures the panel of real and nominal variables (C51) | provides a framework for identifying turning points and structural shocks in core inflation (E32) |
| weekly innovations of core inflation estimates (C43) | helps in identifying turning points (E32) |
| first week innovations (O35) | interpreted as nominal shocks (E39) |
| third week innovations (O35) | interpreted as real shocks (C51) |
| sequential ordering of data releases (C69) | influences the identification of shocks in core inflation (E31) |
| structured information flow (D83) | accuracy of core inflation estimates (E31) |