High-frequency data could improve GDP estimates – RBI researchers

Early data releases on growth could be made more accurate if economists take into account a wider set of macroeconomic data, researchers from the Reserve Bank of India argue in an article published today (May 1).

The ‘Mint Street Memo’ finds that early releases of GDP and gross value-added growth tend to be revised upwards as “data coverage” improves. The revisions are particularly large when the growth cycle turns, the authors say.

“It may be advisable for data users to read GDP growth numbers carefully along with other high-frequency indicators of the real economy,” they write. Various sectors of the economy tend to put out indicative information on economic conditions that can be used to build up a more accurate picture of growth.

“These sets of new information can be incorporated in state-of-the-art methods such as ‘nowcasting’ to produce better (potentially unbiased) estimates of economic growth relative to simply employing the reported [first advance estimates],” they say.