Guest Contribution: “Macroeconomic nowcasting in times of Covid-19 crisis: On the usefulness of alternative data”

Today, we are pleased to present a guest contribution written by Laurent Ferrara (SKEMA Business School and QuantCube Technology), Alice Froidevaux (QuantCube Technology) and Thanh-Long Huynh (QuantCube Technology).

Nowcasting macroeconomic activity has proved extremely useful to track in real-time fluctuations of macro aggregates like GDP, inflation, consumption … Indeed, Quarterly National Accounts are generally published on a quarterly basis by Statistical Institutes, with a delay of release of about one or two months. For example, to be aware of the economic activity in the first quarter of the year (from beginning of January to end of March), we need sometimes to wait until mid-May, depending on the country considered.

This is why nowcasting tools have been developed in order to be able to inform policy-makers and economic agents about the current state of the economy. As regards the U.S. economy, Atlanta Fed and New York Fed release on a regular basis estimates of current and future quarter-over-quarter GDP growth rate, expressed in annualized terms. Surprisingly, as March 25, 2020, the nowcast of Atlanta Fed for 2020q1 was of 3.1%, while it is clear today that the Covid-19 crisis is likely to have a strong impact on the economic activity in March, thus on Q1 (see previous Econbrowser posts here and here). The GDP nowcast from New York Fed was a bit lower at 1.49% as March 20, but still quite high.

How is that? In fact, all those nowcasting tools have been extremely well built but they only integrate official information, such as production, sales, surveys, that are released by official

Keep reading this article on Econbrowser Blog - James Hamilton & Menzie Chinn.

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