Improving GDP Measurement: A Forecast Combination Perspective
Two often-divergent U.S. GDP estimates are available, a widely-used expenditure side version, GDPE, and a much less widely-used income-side version GDPI . We propose and explore a "forecast combination" approach to combining them. We then put the theory to work, producing a superior combined estimate of GDP growth for the U.S., GDPC. We compare GDPC to GDPE and GDPI , with particular attention to behavior over the business cycle. We discuss several variations and extensions.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. For research support we thank the National Science Foundation and the Real-Time Data Research Center at the Federal Reserve Bank of Philadelphia.
"Improving GDP Measurement: A Forecast Combination Perspective," in X. Chen and N. Swanson (eds.), Recent Advances and Future Directions in Causality, Prediction, and Specification Analysis: Essays in Honor of Halbert L. White Jr., Springer, 1- 26, 2012. With B. Aruoba, J. Nalewaik, F. Schorfheide and D. Song,