The focus group here at "A Dash" rejected the original title for this piece, the more professorial "Understanding and Predicting Revisions in Government Data." Whatever the title, it is the same topic.  It will be uninteresting to the many who have already made up their minds.  It continues our theme about those who disparage information from many sources. There is a quiet battle going on.  It is more important than most realize.  On one side are those whose every article seeks to "dumb down" the discussion.  They find something wrong with every data release.  These commentators, who almost universally lack the traditional training or credentials, use some "common man" argument, appealing to what most readers already believe.  What do they have at stake?  If correct, then their opinions are just as good as the PhD economists!  And with no cost in time ...

The current credit crisis should be both a squeeze and a crunch, but it seems to have been neither in the euro area. This column explains why credit may become costlier or scarcer under current conditions and explores how European financial entities seem to be defying the negative news. There are two channels through which the present credit crisis can affect economic activity. The first is prices, making credit more costly, and the second is quantities, making it scarcer. Dearer credit is called a "credit squeeze" and while scarcer credit is called "credit crunch". The euro area seems to be suffering neither of the two, at least for the time being. Credit may be getting dearer for at least for four reasons. -Today's banks tend to face higher spreads when issuing debt compared to non-banks, even of the same rating, thus their lending to ...

by Menzie Chinn New aggregate indicators on the macroeconomy are out. How do they compare against a summary measure of the macro series the NBER BCDC focus on? A week ago, Macroeconomic Advisers released their estimate of April GDP, while e-Forecasting released their estimate of May GDP. These two series are depicted in Figure 1. Recall that the NBER BCDC examines four other variables to gauge economic activity: payroll employment, industrial production, real manufacturing and trade sales, and real personal income less transfers [1]. To see how GDP has moved differently from these other measures of economic activity, see this post. Rather than providing a welter of series, I’ve tried to summarize the movement in these four variables by generating an index that is the first principal component of the four underlying series (all logged). This is the blue line in Figure 1. Figure 1: First ...

Article Source Over the past few days, I've been trying to identify appropriate measures of the output gap (and trying to relate that to exchange rate changes). As I've done so, I've come to realize that (1) it's a difficult thing to do, and (2) interesting stories come out of different measures. The easiest thing to do is to pull down the CBO's measure (interpolated to quarterly frequency). This yields the following picture (in logs): Figure 1: Log real GDP (Ch.2000$, SAAR) (blue line), and log potential GDP. NBER-defined recession dates shaded gray. Source: BEA, GDP release of 29 May 2008, and CBO, Update of CBO's Economic Forecast (February 2008), data [xls], and NBER. Two observations: (i) recessions do not necessarily coincide with negative output gaps (although they do seem to coincide with the beginning of periods of ...