Working Paper: NBER ID: w19650
Authors: Alessandro Beber; Michael W. Brandt; Maurizio Luisi
Abstract: We propose a simple cross-sectional technique to extract daily factors from economic news released at different times and frequencies. Our approach can effectively handle the large number of different announcements that are relevant for tracking current economic conditions. We apply the technique to extract real-time measures of inflation, output, employment, and macroeconomic sentiment, as well as corresponding measures of disagreement among economists about these indices. We find that our procedure provides more timely and accurate forecasts of future changes in economic conditions than other real-time forecasting approaches.
Keywords: Macroeconomic indicators; Forecasting; Economic conditions; Principal component analysis
JEL Codes: E0; E17; E27; E32; E37; E44; G0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inflation factor (E31) | Consumer Price Index (CPI) releases (C43) |
| better real-time measurement of economic fundamentals (E39) | resolve disconnect between macroeconomic indicators and financial market volatility (E32) |
| growth factor (O40) | GDP growth (O49) |
| growth factor (O40) | Chicago Fed National Activity Index (CFNAI) (E39) |