Question for DU economists

[DemocratSinceBirth]

Why is there is such a discrepancy between the:



New York Fed GDP forecast- https://www.newyorkfed.org/research/policy/nowcast


and the


Atlanta Fed forecast- https://www.frbatlanta.org/cqer/research/gdpnow.aspx

[at140]

1. WOW the difference is enormous!

One of them is way off. We won't know who until late October.

[unblock]

2. from the faq:

https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=fa9ccf1bede04c3b8a3ac751883e58a91

What are the differences between GDPNow and the FRBNY Nowcast models? Why do the two models have different forecasts?

The FRBNY Nowcast model of real GDP growth is based on a dynamic factor model described in this Liberty Street blog entry. The Chicago Fed National Activity Index and Aruoba-Diebold-Scotti Business Conditions Index are both indicators of economic activity estimated from factor models. The latest nowcast from the FRBNY Nowcast model along with some related Q&A is available here.

The Atlanta Fed's GDPNow also uses a dynamic factor model—based on a model from one of the New York Fed economists who coauthored the Liberty Street blog entry—but uses the factor only as an input to fill in the yet-to-be-released monthly source data for GDP. The estimates of this dynamic factor are available in the Factor tab of this Excel file.

The monthly source data are then used to estimate the subcomponents of GDP, which are then aggregated up to a real GDP growth nowcast. Besides a dynamic factor model, GDPNow uses several other econometric techniques, including "bridge equations" and Bayesian vector autoregressions, to nowcast the subcomponents of GDP. The exact methods are described in this working paper. The numerical details—including the raw data and model parameters—translating the monthly data into nowcasts of the subcomponents of GDP in the latest GDPNow forecast are available in this Excel file (see the ReadMe tab).

Because GDPNow and the FRBNY Nowcast are different models, they can generate different forecasts of real GDP growth. Our policy is not to comment on or interpret any differences between the forecasts of these two models.

[C-SPAN4me]

3. Difference btwn qtrly vs annualized?

I read the NY number as a strictly quarterly number, while the ATL number has been annualized. (I admit, I just skimmed, but that was my take.)