Courtesy of Mish.
I had had recent phone and email conversations with senior economists at the New York Fed and Atlanta Fed regarding their GDP forecasts.
The Atlanta Fed calls its model GDPNow and the New York Fed calls its model the FRBNY Staff Nowcast (simply referred to as “Nowcast” below).
The Fed offices are not in competition with each other, although quarter-to-quarter “bragging rights” may be in order. That is my subjective hypothesis, not based on any economist’s statement.
Let’s take a look at the theory as well as possible flaws in the models.
I know most about the New York Fed model, so let’s start there. Some of the discussion is mathematical, but I will explain in easy to understand terms.
Nowcast Model
Nowcast is a “single factor model” based on Kalman Common Filtering Techniques.
