Generalized Nowcast Revision Analysis

Abstract

The nowcast revision analysis is about how a nowcast of the target variable is revised in response to data releases in real time. The content of a data release includes data revisions as well as new observations. The nowcast also changes when the model parameter is revised. The existing revision analysis is capable of breaking down the new-observations effect on the nowcast into contributions from individual indicator variables, but no such breakdown is available for the data-revisions effect and the parameter-revisions effect. This paper shows how the breakdown can be applied to all three effects. For illustration, the new method is applied to nowcasting U.S. GDP growth for 2021:Q2.