Real-Time Measurement of Business Conditions

(with Francis X. Diebold and Chiara Scotti)

Published in Journal of Business and Economic Statistics, 2009, 27(4), 417-427 (lead article).

We construct a framework for measuring economic activity at high frequency, potentially in real time. We use a variety of stock and flow data observed at mixed frequencies (including very high frequencies), and we use a dynamic factor model that permits exact filtering. We illustrate the framework in a prototype empirical example and a simulation study calibrated to the example.

First Draft : March 2007

As of January 9, 2009, the Federal Reserve Bank of Philadelphia started producing the Aruoba-Diebold-Scotti Business Conditions Index based on the methods developed in this paper.

Paper

NBER Working Paper 14349 [September 2008]

Most Recent Working Paper (may not be identical to the published version)

Published Version (requires subscription)

Additional Materials

Simple Example (uses Eviews)

RATS code that replicates the results of the paper (also includes our data) (Written by Tom Doan from Estima — offered here with no warranties)

Press Mentions

Dow Jones Newswires [January 9, 2009]

The Press of Atlantic City [January 11, 2009]

Philadelphia Inquirer [January 15, 2009]

Econ Browser (James Hamilton’s Blog) [April 15, 2009]