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Click here for
the new home page for Web Sites for Tracking the
Technical Articles and Papers of Interest on Economic
Indicator Methodologies Since the Second Edition of
The Handbook of Key Economic Indicators
INTRODUCTION TO TECHNICAL ARTICLES
For the advanced or experienced analysts of economic indicators, reading technical articles on indicator methodologies and business cycle analysis is a good way to finely hone skills at interpreting economic data. However, this is time intensive and not all who track the economy want to delve that deeply. Hence, the Handbook of Key Economic Indicators, Second Edition, has several layers of complexity. For beginners, there are the basics about economic indicator definitions, what components are important, what to look for, and how markets react to the data. For intermediate economy watchers, there are moderately detailed explanations of how to analyze movement of various indicators over the business cycle and how each indicator relates to various sectors. For the more experienced analysts and serious researchers, underlying methodologies are explained in understandable terms in the text but with detailed references and footnotes included. For this latter group, this web site supplements the detail on estimation methodologies with the latest publication citations for economic indicator methodologies and analysis.
This page begins with links to others sites that specialize in economic indicator methodologies or research on business cycle analysis. Specific cites for notable publications on these topics follow.
SITES RELATED TO ECONOMIC INDICATOR METHODOLOGIES OR ANALYSIS
- Bureau of Economic Analysis Papers on BEA Methodologies
- Bureau of Labor Statistics (BLS) Working Papers
- Bureau of the Census, Publications Since 1996 in PDF Format
- Fed in Print: An Index to Federal Reserve Economic Research
RECOMMENDED INTRODUCTORY MATERIAL
Table of
- Rogers, R. Mark, "A
Primer on Short-Term Linkages between Key Economic Data Series," Economic
Review, Federal Reserve Bank of
This article is an excellent introduction to the monthly cycle of economic releases and what timing, methodological, and statistical indicators have with each other. It was published during the same time that the Second Edition, Handbook of Key Economic Indicators was in final edit for publication in the summer of 1998. This article is a very good complement to the Introduction in the Second Edition, which covers the monthly indicator cycle and how to interpret relative strength over the business cycle. From the introduction to the article:
This article is a brief guide to some of the well-known short-term relationships between economic data series upon which many analysts focus. It explains how analysts use data in concurrent month forecasts and what some key relationships are, outlines the monthly calendar of economic releases, and reports on typical lags between various dependent and explanatory variables. The article attempts to clarify how analysts carry information from one economic release into their view of the strength of other economic indicators.
BEIGE BOOK, FEDERAL RESERVE SYSTEM
- Fettig, David, and Arthur J. Rolnick, and David E. Runkle, "The Federal Reserve's Beige Book: A Better Mirror Than Crystal Ball," The Region, Federal Reserve Bank of Minneapolis, March 1999, pp. 10-13, 28-32. Downloadable in html.
Origin of Federal Reserve's Beige
Book. Explanation of compilation of Beige Book. Analysis of purpose and value
in evaluating strength of the economy. Quantitative "scoring" of
Beige Book against other measures of the economy. Very good "time
line" of Beige Book and key economic events in
CONSUMER PRICE INDEX
- "REVISIONS IN JANUARY TO AUGUST 2000 CPI DATA,"
September 28, technical explanation of errors in the CPI from BLS. HTML.
- Government
misreported inflation. Labor Department calculating glitch led to
understatement in CPI. By John M. Berry. THE
Consumer price inflation has been slightly higher over the past year than officially reported because of a calculating glitch at the Bureau of Labor Statistics, government sources said. THE BUREAU is preparing to revise upward the change over the last year in its consumer price index, the nation's most closely watched measure of inflation and the one used by the government to calculate cost-of-living adjustments in Social Security payments, veterans benefits and federal pensions. Full Washington Post story in html.
- Abraham, Katharine G., John S. Greenlees, and Brent R. Moulton, "Working to Improve the Consumer Price Index," Journal of Economic Perspectives, Winter 1998, pp. 27-36.
- Boskin, Michael J. et al., "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, Winter 1998, pp. 3-26.
- Conference Board, The, "Press Release: TCB study group recommends improvements to CPI"
The Conference Board's Study Group
on the Consumer Price Index today recommended substantial improvements in
methods used to compile the index to keep pace with the ever changing
- Deaton, Angus, "Getting Prices Right: What Should Be Done?" Journal of Economic Perspectives, Winter 1998, pp. 37-46.
- Diewert, W. Erwin, "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, Winter 1998, pp. 47-58.
Beginning in January 1999, a new geometric mean formula will replace the current Laspeyres formula in calculating most basic components of the Consumer Price Index; the new formula will better account for the economic substitution behavior of consumers. Table of components retaining Laspeyres formula. Explanation of geometric mean formula. Factors behind BLS decision for switch. Summary of research behind the formula. How BLS introduces geometric mean into CPI indexes.
- Nordhaus, William D., "Quality Change in Price Indexes," Journal of Economic Perspectives, Winter 1998, pp. 59-68.
- Pollak, Robert A., "The Consumer Price Index: A Research Agenda and Three Proposals," Journal of Economic Perspectives, Winter 1998, pp. 69-78.
- Stewart, Kenneth J. and Stephen B. Reed. "Consumer Price Index Research Series Using Current Methods, 1978-1998," Monthly Labor Review, U.S. Department of Labor, June 1999, pp. 29-38. Downloadable in PDF.
The Bureau of Labor Statistics has made numerous improvements to the CPI over the past quarter-century. While these improvements make the present and future CPI more accurate, historical price index series are not adjusted to reflect the improvements. Many researchers, however, would like a historical series that was measured consistently over the entire period. Accordingly, this article presents an estimate of the CPI-U from 1978 to 1998 that incorporates most of the improvements made over that time span into the entire series. The new measure, called the CPI research series using current methods (CPI-U-RS), attempts to answer the question, "What would have been the measured rate of inflation from 1978 forward had the methods currently used in calculating the CPI-U been in use since 1978?" This article lists the methodology improvements made in the official CPI from 1978 through 1998. For researchers wanting to use consistently defined CPI data, this article is a must read.
Economic-Indicators.Com
has obtained the CPI-U-Research Series from the Bureau of Labor of Labor
Statistics. These data are not seasonally adjusted and must be
"linked" with the corresponding official CPI-U series because of
different base periods. Only a select number of aggregated
CPI-U-Research series are available. Available are series for the major
expenditure groups, total CPI, CPI excluding food and energy ("core
CPI"), and commodity group series for food and for energy. The BLS
also created a recalculated series for the former Entertainment category since
the new Recreation category only starts in 1998. To download all
available series, please click the following link. CPI-U-Research
Series in Excel 5.0/95 format.
- Wallace, Alison and
Brian Motley. "A Better CPI," Economic Letter, Federal Reserve
Bank of
This article summarizes sources of bias in the CPI , BLS actions (changes in the CPI since 1995) to remove bias, planned changes, implications for public policy, and conclusions.
EMPLOYMENT COST INDEX
- Garner, C. Alan. "A Closer Look at the Employment Cost Index," Economic Review, Federal Reserve Bank of Kansas City, Third Quarter 1998, pp. 63-78. Available in pdf format.
Garner compares the ECI and other labor cost measures in the first section of this paper. He goes over definitions and methodologies. From the research, he finds that the ECI is quite useful in analyzing broad economic trends, such as the shift in jobs toward the service sector, and in making business decisions about employee compensation. He concludes, however, that the ECI is more useful for labor market analysis and wage setting than for general inflation forecasting.
GROSS DOMESTIC PRODUCT AND NIPA IN GENERAL
On October 28, 1999, the BEA released revised estimates for 1959--99 from the
11th comprehensive revision of the national income and product accounts.
Comprehensive revisions, which are carried out every 4 to 5 years, are an
important part of BEA's regular process for improving and modernizing its
accounts to keep pace with the ever-changing
- Grimm, Bruce T. and
Robert P. Parker. "Reliability of the Quarterly and Annual Estimates
of GDP and Gross Domestic Income," Survey of Current Business,
An analysis of the reliability of
the current quarterly estimates of real GDP since 1983 shows that they almost
always provide the correct indication of the direction of change in U.S.
economic activity. About three-fourths of the time, the current quarterly
estimates correctly indicate whether the pace of
Latest information on underlying NIPA methodologies. Extensive summary tables: (1) principal source data and estimating methods used in preparing estimates of current-dollar GDP and for (2) constant-dollar GDP. Includes price deflators used.
- Moulton, Brent R., Robert P. Parker, and Eugene P. Seskin. “A Preview of the 1999 Comprehensive Revision of the National Income and Product Accounts: New and Redesigned Tables, Definitional and Classificational Changes,” Survey of Current Business, August 1999, pp. 7-20. PDF file. HTML file.
The upcoming comprehensive revision of the NIPA's will feature a number of
definitional and classificational changes that will significantly improve the
NIPA measures of output, investment, and saving. In particular, business and
government expenditures for software will be recognized as fixed investment,
government employee retirement plans will be reclassified from the government
sector to the personal sector, and certain transactions will be reclassified as
capital transfers. The recognition of software as investment will raise GDP
(for 1996, by roughly 1 percent); the other definitional and classificational
changes will have little effect on GDP, but several of them will raise private
saving and reduce government saving.
- Moulton, Brent R. and David F. Sullivan. “A Preview of the 1999 Comprehensive Revision of the National Income and Product Accounts: New and Redesigned Tables, New and Redesigned Tables,” Survey of Current Business, September 1999, pp. 15-28. PDF file. HTML file.
As part of the upcoming comprehensive revision, the presentation of the NIPA's
will be updated to reflect the definitional, classificational, and statistical changes
that will be introduced and to make the tables more informative. Seventeen new
tables will be introduced, including tables that provide additional detail and
supplement the existing table on contributions to percent change in real GDP,
tables on changes in the net stock of produced assets and on motor vehicle
output, and summary tables that highlight percent changes and contributions to
percent changes in real GDP. In addition, many of the existing tables will be
redesigned to reflect the definitional changes, such as the recognition of
business and government expenditures on software as investment.
- Moulton, Brent R. and David F. Sullivan. “Preview of the 1999 Comprehensive Revision of the National Income and Product Accounts: New and Redesigned Tables, Statistical Changes,” Survey of Current Business, October 1999, pp. 6-17. PDF file. HTML file.
The upcoming comprehensive revision of the NIPA's will feature a number of statistical changes that improve the estimates by using newly available source data or by introducing new methodologies. The major source data that will be incorporated include the 1992 benchmark input-output accounts, preliminary estimates from the 1996 annual update of these accounts, selected data from the 1997 economic censuses, and regular source data that would normally be incorporated in an annual revision of the NIPA's. In addition, methodological changes will be incorporated that make the income estimates more consistent with the product estimates, improve the estimates of State and local government taxes, provide a better measure of the real value of unpriced bank services, and improve the prices of a number of NIPA estimates.
- Payne, David. "Predicting GDP Growth Before the BEA's Advance GDP Release: A How-To Manual," Business Economics, April 2000, National Association for Business Economics, pp. 54-63.
Prior to the Bureau of Economic Analysis' advance GDP release, many GDP components can be anticipated using publicly available source data and regression analysis. This article shows which ones, addresses the adding-up problem when using chain-weighted data, and notes pit-falls to avoid.
- Seskin, Eugene P.
"Annual Revision of National Income and Product Accounts: Annual
Estimates, 1995-97, and Quarterly Estimates, 1995:I—1998:I," Survey
of Current Business,
Personal saving (and the personal saving rate) was revised down substantially, and undistributed corporate profits and the State and local government surplus or deficit were revised up substantially.
The annual revisions reflect the incorporation of regular source data and the introduction of the following major changes in methodology: A redefinition affecting dividends paid by regulated investment companies (mutual funds); new source data for several types of consumer services; geometric-mean-type consumer price indexes for deflation of detailed components of personal consumption expenditures (PCE);and several new price measures—primarily producer price indexes and international price indexes—for deflation of PCE, fixed investment, exports and imports, and government spending.
Includes notes on methodology changes. Most notable methodology changes are for estimating changes in business inventories and for estimation of dividend income which in turn affects personal income and personal saving--the latter significantly. Special box on the personal saving rate. Significant discussion of new price deflators.
INITIAL UNEMPLOYMENT CLAIMS
- McConnell, Margaret M.
" Rethinking the Value of Initial Claims as a Forecasting Tool,"
Current Issues in Economics and Finance, Federal Reserve Bank of
The weekly numbers on initial claims for unemployment insurance convey key information about the labor market. But how reliable are claims in predicting changes in the much anticipated monthly employment report? According to a simple forecasting model, claims consistently send an accurate signal about employment during recessions but not during expansions.
LEADING INDICATORS
- Klein, Philip A. "Reliable Leading Indicator Lists—Why So Many Revisions?" Business Cycle Indicators, the Conference Board, November 1999, pp. 2-4.
Review of rationale underlying past revisions of the composition of the composite index of leading indicators. Table of components of composite index of leading indicators and length of use, 1938-1996.
MANUFACTURING SURVEYS
- Lacy, Robert L.
"Gauging Manufacturing Activity: The Federal Reserve Bank of
This article explains the
techniques employed in gathering data and compiling results for the Richmond
Fed's manufacturing survey. It also evaluates the survey's usefulness as a tool
for economic analysis and compares surveys conducted by the Federal Reserve
Bank of
- Trebing, Michael E.
"What's Happening in Manufacturing: 'Survey Says…,'"
Federal Reserve Bank of
In recent years, the Philadelphia Fed’s Business Outlook Survey (BOS) has received a great deal of attention from financial journalists and market participants. The monthly survey gathers information from manufacturers in the Third Federal Reserve District about current conditions at their plants and their expectations for the future. In this article, Mike Trebing evaluates whether the survey provides new information on short-term changes in the regional and national manufacturing sectors.
PRODUCER PRICE INDEX
- Klemmer, Katherine A. and
Joseph L. Kelley. "Comparing PPI Energy Indexes to Alternative Data
Sources," Monthly Labor
Alternative source measures of prices for energy products closely track related producer price series. Article contains good discussion of alternative sources for energy price data.
PRODUCTIVITY
- Dean, Edwin R. "The
Accuracy of the BLS Productivity Measures," Monthly Labor
Overall productivity growth may be somewhat underestimated; despite continued progress, measurement and conceptual barriers remain. Five key issues addressed: (1) whether there is in fact mismeasurement of productivity growth in the services portion of the economy—concluding that there are problems that may be leading to underestimation; (2) the specific sources of mismeasurement—with the determination that there is no basis for determining the extent of underestimation and there is no basis for a claim of a large underestimation; (3) what can be done to improve measurement of productivity in services; (4) the impact of alleged biases of the CPI on productivity estimates; and (5) the difficulty of defining output for many services activities.
- Duke, John and Lisa Usher.
"BLS Completes Major Expansion of Industry Productivity Series,"
Monthly Labor
Increased availability of data in recent years has made possible complete coverage of manufacturing and retail trade industries. Discussion of new database series for productivity, output, and labor input for 549 four-digit industries and 202 three-digit industries.
- Eldridge, Lucy P. "How Price Indexes Affect BLS Productivity Measures," Monthly Labor Review, U.S. Department of Labor, February 1999, pp. 35-46. Downloadable in PDF.
Price indexes play a significant role in measuring real output and productivity; thus, potential bias in price indexes, as well as a lack of price indexes, can impact the accuracy of productivity measures.
- Gullickson, William and Michael J. Harper. "Possible Measurement Bias in Aggregate Productivity Growth," Monthly Labor Review, U.S. Department of Labor, February 1999, pp. 47-67. Downloadable in PDF.
By examining industry multifactor productivity in more detail, researchers can gain new insights into the hypothesis of measurement bias in aggregate output and productivity.
- Webb, Roy H. "National Productivity Statistics," Economic Quarterly, Federal Reserve Bank of Richmond, Winter 1998, pp. 45-64. Downloadable in PDF.
This article reviews the most important definitions of productivity used in the United States. The article also contains a brief sketch of the historical behavior of productivity and then warns readers about potential pitfalls in using productivity statistics. Some multicountry comparisons are included. Finally, background material is used to address questions concerning the recent behavior of productivity statistics. Mismeasurement is discussed as one possible explanation of a trend slowing in productivity growth in the U.S. Other possible explanations discussed include changes in energy prices (during the 1970s), institutional sclerosis, technical change and lags in learning, and a possible decline in the productivity of research and development.
SAVING
- Larkins, Daniel. "Note on the Personal Saving Rate," Survey of Current Business, U.S. Department of Commerce, February 1999, pp. 8-9.Available in pdf format.
Discussion of recent trends in personal saving rate. Comparison with Federal Reserve Board's measure. Comparison of personal saving with gross saving.
- See in section for GDP and NIPA in General: Seskin, Eugene P. "Annual Revision of National Income and Product Accounts: Annual Estimates, 1995-97, and Quarterly Estimates, 1995:I—1998:I," Survey of Current Business, U.S. Department of Commerce, August 1998, pp. 7-35. Downloadable in PDF.
Significant methodology changes in estimation of personal saving discussion--mainly related to dividend income.
Email comments or suggested additions to RMRogers@mindspring.com
