Nowcasting and More: “The 24th Federal Forecasters Conference”

The Federal Forecasters Consortium conference took place a month ago, but the video links are now up,

The theme of the conference:

Forecasters often need to predict the present—or “nowcast’’—to help inform policy decisions. The onset of the pandemic highlighted the importance of nowcasting the economy and the pandemic itself. Conditions altered rapidly and policymakers responded to those changes with unprecedented fiscal and monetary stimulus and with public policies such as lockdowns and mask mandates. To aid in nowcasting, forecasters turn to machine-learning techniques  and high-frequency data, which are often drawn from alternative data sources such as social media, rather than from standard sample surveys and administrative data. Nowcasting poses difficult challenges, particularly because data about the present may be unavailable, incomplete, or inaccurately measured. While highfrequency data can be a great source of timely and detailed information, it can come with its own dynamics, noise, and structural breaks. Those features can arise as a byproduct of individual decisions (as with Twitter) or the customer composition for private businesses (as with credit card transactions). The conference will consider nowcasting and its roles in decision-making. How have recently developed tools and data sources contributed to nowcasting, and how do nowcasts serve policymakers?

PDF of the program, with links to slides and papers here. Program committee: Greg Won, Neil R. Ericsson, Edward N. Gamber, Kyle Hood, Maria Hussain, Maros Ivanic, Andrew B. Martinez, Anne Morse, Andy Roche-DeJesus, Tara Sinclair, Brian Sloboda.

My panel was on interest rates; Prakash Loungani, aka Unassuming Economist (IMF) discussed forecasting the housing market, William Larson (FHFA) presented on mortgage rates and house prices. I presented my paper with Stalla-Bourdillon and Chatelais, discussed in this post.

38 thoughts on “Nowcasting and More: “The 24th Federal Forecasters Conference””

  1. ltr

    https://english.news.cn/20221022/6a5fb4ee07464f6996a194cececfdca6/c.html

    October 22, 2022

    Chang’e-5 samples reveal how volcanism takes place on moon

    BEIJING — A Chinese group analyzed lunar samples returned by China’s Chang’e-5 mission and proposed a new mechanism for how young volcanos took shape on the cooling moon 2 billion years ago.

    Scientists previously speculated that the elevated water content or radioactive elements in the lunar interior might have driven volcanism in the late stage of the moon’s life. But the Chang’e-5 data found its mantle source region both dry and lacking in heat-producing substance.

    The study * published on Saturday in the journal Science Advances showed that the mantle melting-point depression due to the presence of fusible, easily-melted components could generate young lunar volcanism.

    The researchers from the Institute of Geology and Geophysics of the Chinese Academy of Sciences (IGGCAS) scrutinized 27 Chang’e-5 basalt clasts to calculate the original ingredients of those samples.

    They found that the young Chang’e-5-source magma might have higher calcium oxide and titanium dioxide contents than magmas in older samples returned by the Apollo Missions.

    China’s Chang’e-5 probe has revealed surprisingly young volcanic activity, only 2 billion years old, ruling out the theory that the moon has been geologically dead after the formation of Apollo samples at least 3 billion years ago.

    “Recent lunar mantle melting can be achieved by either raising the temperature or lowering the melting point,” said the paper’s corresponding author Chen Yi, an IGGCAS researcher.

    The study shows that the late-stage lunar magma ocean cumulates in Chang’e-5 samples are rich in calcium and titanium. It melts easier than early cumulates.

    The scientists proposed that those fusible components added to the lunar interior could have efficiently reduced the mantle melting temperature and thus triggered the young lunar volcanism.

    “We discovered that the Chang’e-5 magma was produced at similar depths but 80 degrees Celsius cooler than older Apollo magmas,” said the paper’s first author Su Bin from IGGCAS.

    “That means the lunar mantle experienced a sustained, slow cooling of 80 degrees Celsius from some 3 billion years to 2 billion years ago,” said Su.

    The work presents evidence for a viable mechanism to account for young volcanism on the moon that is compatible with the newly returned Chang’e-5 samples, according to the researchers.

    “This study can help planetary scientists better understand the moon’s thermal and magmatic evolution,” said Chen.

    * https://www.science.org/doi/10.1126/sciadv.abn2103

  2. Moses Herzog

    I was poking around some blogs this morning. Claudia Sahm now has a substack for anyone interested. and a YT channel. I’ll be checking in from time to time, mostly for comedy relief.

    But for those who take Sahm’s thoughts in a more studious manner, seriously, if you are one of the people who thinks life is inadequate unless we have “X” percent of female economics bloggers, now’s your big chance to prove you genuinely mean it and read and quote Sahm’s substack to your heart’s content. To me it’s kind of like women who complain about differentials in women’s sports funding. Lots of “you naughty people” finger waving, and more men than women even at the female sports events. Pay tickets for the damned games/events, then tell us about how horrible men are for how the funding is distributed.
    There’s zero barriers to getting Sahm’s content, assuming she’s right and they’re all getting severely short-changed, her blog should add so much value it breaks the record books for economics blog visits in the next 6 months. There’s no Dept. Dean or Fed Res official stopping anyone from the vast epiphanies of Claudia Sahm to be voraciously consumed.

      1. Moses Herzog

        Sahm seems to by implication be saying for multiple years now, that she created every new economic theory that has come down the pike for the last 20 years and the evil (read nonexistent) “patriarchy” has stolen all of her groundbreaking ideas and kept her over in the broom closet of every famous institution she has been a member of, and usually lasts about 4 years, where she subsequently drops closer to her true competency level.

        I think it’s wonderful, astounding wonderful Sahm has discovered Google blogs and Substack, now she can upload immediately, (PLEASE FOR THE LOVE OF GOD, you can kill the “economics patriarchy” on the spot. UPLOAD< UPLOAS NOW PLEASE) the next time she discovers electricity before evil patriarch Ben Franklin or Michael Faraday “steal” it from her, or Edison steals her blueprints on the lightbulb, and the general public, along with the ENTIRE economics profession can see her “systemically disruptive” and “paradigm shifting” work only a few moments after it pops out of her mind and some other person says her idea really wasn’t as new as she thought. No really, I’m already salivating for what she’s going to tell us to shift our world. Yes Google blogs and twitter uploads are about to expose the evil patriarchy that has TORTURED this intellectual giant Sahm for too long……. really……. I mean really really.

        Maybe Oprah Winfrey and Sheryl Sandberg can underwrite the “Sahm Institute” then we’ll really be killing it in the innovation dept. PLEASE, Tomorrow. morning, PLEASE save us from the economics patriarchy. Perhaps “Navel-Gazing Institute” could be the working title in the fledgling months.

  4. pgl

    Bad to the Bone is an awesome rock tune so enjoy as I explain why I post this:

    https://www.youtube.com/watch?v=IyhJ69mD7xI

    It seems the Hershel Walker campaign bus is playing this as he visits various towns. Of course Bad to the Bone is about a womanizer so I guess this is just honesty even if one has to be brain dead to play this when running for the Senate. MAGA!

  5. pgl

    The Warnock campaign has finally took the gloves off with respect to the disgusting MAGA candidate Hershel Walker and it is about time:

    https://host2.adimpact.com/admo/viewer/8f0ef5c4-075d-4693-bbeb-d7babf1b2a9c

    I’m Raphael Warnock, and I approve this message for you. Herschel Walker wants to ban abortion. There’s no exception in my mind. Like I said, I believe in life there’s not a national ban on abortion right now, and I think that’s a problem. But for himself, Herschel Walker paid for an abortion for his then girlfriend. She’s supported her claims with a $575 receipt from the abortion clinic. Even his own son is saying Walker is lying. Is that your signature? Yes, that’s my …

  6. Macroduck

    I have a tangled little story to tell about derivative markets unraveling and Fed tunes changing…

    UNIPER needed a parent-company credit line to meet margin calls in January:

    https://www.bloomberg.com/news/articles/2022-01-04/uniper-agrees-on-new-financing-due-to-commodities-volatility

    By September, the German government had to nationalize the company to prevent its collapse:

    https://www.ft.com/content/2190babb-1cb8-49f1-a9d5-2c9d98539de9

    Now, Uniper needs another slug of money to keep buying gas to deliver:

    https://www.google.com/amp/s/oilprice.com/Latest-Energy-News/World-News/German-Government-May-Have-To-Inject-Another-39-Billion-In-Energy-Giant-Uniper.amp.html

    The first two cash injections were the result of hedges blowing up – the result of simultaneous changes in the cost of gas and credit.

    Uniper is not alone. Italy’s Enel is in the process of tapping a credit line for E16 billion:

    https://www.reuters.com/business/energy/italy-oks-process-grant-state-guarantees-enel-credit-facility-source-2022-10-19/

    The credit facility being tapped was Draghi’s idea – Italy’s party politicians smooched the pooch when they let him go.

    Enel’s problems are much like Unipers, with the addition of exchange rate hedges blowing up.

    Anybody remember how Liz Truss blew up UK markets? Open-ended pension funds sold government debt to fund withdrawal, causing prices to cascade and liquidity to disappear? Well the rise in yields caused other assets to lose value, and now the securitized junk loan market (collateralized loan obligations- CLOs) is tanking. Pension funds are again big sellers. One big buyer, Norinchukin Bank, withdrew from the CLO market and that was the end of liquidity in the UK CLO market. And Europe. And the U.S.:

    https://www.bloomberg.com/news/articles/2022-10-17/clo-giant-norinchukin-halts-purchases-as-uk-volatility-spreads

    I don’t have a handle on how badly the U.S. CLO market has been hit, and it’s too soon to tell whether trouble will persist. I do find it curious that Daly and Bullard both said “we won’t keep hiking rates forever” on Friday. Coincidence or reaction to market troubles?

    2. pgl

      https://financialpost.com/pmn/business-pmn/enel-in-talks-for-e16-billion-credit-line-messaggero-says

      I thought I knew a bit about Enel’s borrowings but I had to check. S&P’s latest still had its credit rating at BBB+ but we know these things can quickly change. This story says they can borrow at a 1% loan margin over interbank rates, which is not awful. But again life can change quickly change for leverage firms when the price of their inputs can rise dramatically quickly.

    3. Moses Herzog

      @ Macroduck
      I thought it was interesting, one of the major newspapers, might have been NYT but I can’t honestly remember, recently had a large headline that read “UK’s Losses Said to Be Isolated”, and I remember thinking “I wonder why they feel the need to state that??”. To me it had a similar ring to the Lehman denials all over financial media and Jim Cramer on CNBC telling everyone that the “USA banks had more cash/collateral in their coffers than they knew what to do with”. Whenever we start seeing multiple major headlines saying “nothing to worry about”, I keep wondering about major banks, insurance corps, and financial institutions advertising revenue at NYT, WSJ, FT, and etc, and how the translation/subtext in my head reads “Hey dumb retail money, can you wait a few more days until ‘the smart money’ exits their debt/equity positions/exposure???~~Then when only you retail bozos are left in the market, you can panic, but wait until ‘the smart money’ exits, ok!?!?!?!” This is why the “market maker” and “banks provide liquidity tot eh markets” crap (that academics happily parrot like well-trained monkeys) always rings very hollow, to MY ears.

      Great link/story finds Macroduck shows you are paying attention.

      1. Moses Herzog

        2nd to last sentence quoting false boiler plate financial media clichés should read “banks provide liquidity to the markets” .

      2. Macroduck

        The analogy of the financial system as plumbing is a good one. Sure, there’s enough water in the reservoir, but if it can’t get where we need it, all the water in the world won’t help.

        So sure, banks have money. Good for them. Will they use it if they have to take risk onto their own books? Low interest rates led to high debt levels. Interest rates are no longer low. There’s your risk, right there.

        Drives me crazy when I see the kind of headline you mentioned. It ignores plumbing.

    4. Macroduck

      As I sais, I don’t have a good handle on the CLO market, but it looks like spreads on AAA CLO tranches have widened by 50 basis points since September:

      “In Europe, CLO sales have dropped in recent weeks, and in the US, CLO spreads have flared wider, boosting funding costs for money managers putting together the deals. Selling the least risky CLO securities — those rated AAA — has grown particularly difficult now, people said. Spreads on those tranches are nearing 250 basis points, pressuring the potential profits that managers can earn from building these deals. That’s up from the 200 basis points AAAs were getting in the US in September.”

      https://finance.yahoo.com/news/clo-market-pain-magnified-nochu-151702332.html

      Meanwhile, AAA-rated corporate bond spreads have narrowed so far in October relative to September:

      https://fred.stlouisfed.org/graph/?g=Varc

      So even if this is not a strictly apples-to-apple comparison, the CLO market is pretty obviously showing some the strain of reduced liquidity and increased volatility.

      Why does the market for this instrument matter? Banks raise money for new loans by bundling and selling existing loans as CLOs. Less demand for CLOs means less money for new bank loans. Bigger firms have the choice of borrowing through banks or issuing debt. Smaller firms often don’t have that option. Bank lending has so far been pretty strong. Watch this series, among others:

      https://fred.stlouisfed.org/graph/?g=VasM

    5. Macroduck

      My little story was too narrow. Yes, there are signs of stress in the CLO market,but there are signs of stress everywhere. I ignored what is happening in the big markets while looking at the CLO market. Two-year swaps peaked at around 5.1% on Thursday. That’s an alarm-bell level:

      http://www.interestrateswapstoday.com/swap-rates.html

      Note the rate of change and compare it to changes in fed funds expectations. People were holding on to “fixed” for dear life.

      Currency basis swaps have also jumped, amid extreme dollar scarcity. The story, true or not, is that year-end liquidity needs have lots of accounts spooked. (I suspect it’s true.) It’s early to give up on making money before year-end, but why grub after a few measly basis points when margin calls prowl theses markets? This past week, the two most important markets in the world – Treasuries and currencies – were showing cracks. The CLO market, as important as it is, is probably a sideshow. The new “maybe we COULD pause” attitude from Fed folks is more likely a response to the big markets than the tiny little trillion dollar CLO market. My bad.

    6. Barkley Rosser

      Macroduck,

      Thanks for this careful analysis and keeping track of certain fin markets.

      On the matter of Truss and the British markets, Fin Times just had an article arguing that the liabilities oriented approach of the Brit pension funds played this crucial role in the upheavals that brought Truss down, their strategy is in fact wise in the long run, guaranteeing that pensioneers, and that after all the foofaraw, those funds are coming out not so bad, even if the broader British political economic situation is a giant mess.

      1. Barkley Rosser

        guaranteeing that the pensioneers GET PAID THEIR PENSIONS. Sorry about leaving off that crucial last bit in the previous comment.

      2. Macroduck

        Those funds matched assets to liabilities in a particular way, one which did assure payout under a reasonable set of assumptions. They did not and do not have the capacity to pay out under any and all circumstances. No fund does. Their method of assuring payout was vulnerable to margin calls. They got margin calls. Turns out, regulators had a systemic vulnerability to a handful of pension funds behaving in a reasonable manner. It’s the world we live in.

  7. joseph

    Democrats should just give Hershel Walker a certificate for Honorary Senator and he will be satisfied with it.

  8. Macroduck

    Got to the YT videos. One lesson learned – electronic delivery favors higher-pitched voices. Anne Morse came through clearest. Those of us who have learned to pitch low to speak to live audiences are at a disadvantage when it comes to electronic delivery. Too bad – I really like the hurricane guy, Neil Ericsson.

    1. Macroduck

      Anne Morse’s presentation is useful as outside-class viewing for forecasting 101 students. Know you data before you pick an approach. Why not give a simple model a chance? You don’t have to spend a whole afternoon on it and it might produce better results than the error-reduction/back-flip/VAR contraption that’s gonna take you two weeks to cobble together. Always disaggregate – it’s fun and you might notice something. And so on.

      One term I didn’t hear her use, but which she demonstrated with the baby-boom story is “structural change”. Betcha if a bunch of women had done that forecast, they’d have figured in the effects of the pill. Pay attention to the world and your forecasts may improve.

  9. Moses Herzog

    I’ve read a lot of newspaper headlines in my life, some better than others. This one ranks as one of the better headlines:

    “Quantifying Britain’s Moron Risk Premium”

  10. pgl

    I generally avoid the right wing drivel over at Marginal Revolution until Bruce Hall applauds something stupid written by Tyler Cowen. But Kevin Drum reads something so stupid and dishonest that he had to take it down:

    https://jabberwocking.com/republicans-are-the-anti-democracy-party/

    Tyler completely misrepresents something Paul Krugman wrote to make the absurd claim that Democrats are the ones who do not believe in democracy. Yea – it is this kind of garbage that excites little Brucey boy.

    1. Moses Herzog

      Tyler Cowen was pooped out of the same cookie cutter as Stephen Moore, Larry Kudlow, or Kevin Hassett. Tyler reads whatever fraudulent Republican film script that pays for his golf club membership. Reality and truth be damned.

      1. Barkley Rosser

        Sorry, but Tyler is both smarter and less off the wall than those folks.

        And, sorry, he does not have a gold membership any more than I do.

  11. Bruce Hall

    Steve Hanke’s perspective:
    https://www.france24.com/en/tv-shows/people-profit/20221006-the-federal-reserve-is-doing-a-bad-job-economist-steve-hanke

    Federal Reserve Chair Jerome Powell says he won’t cause a deep recession but that “pain” is necessary to fight inflation. To curb the largest price increases in four decades, the US Federal Reserve has been raising interest rates this year. “The Fed is doing a bad job because they don’t have the money supply on their dashboard,” says Steve Hanke, a professor of applied economics at Johns Hopkins University. “The monetary policy revolves around the growth rate and the money supply; that is the key, not interest rates,” he tells FRANCE 24.

    1. pgl

      Dude – you are still pushing the discredited monetarist BS from Steve Hanke? Barkley already told you that this clown is a monetarist nut case. I’m sure you had to see his comment. WTF is wrong with you – did you flunk preK reading or what? Damn!

    2. pgl

      I listened to his interview. Did you?

      He is using the Quantity Theory of Money to predict the inflation rate? I am surprised John Hopkins has not renounced this tenure.

      Come on Bruce – you might as well tout blood leaching as a cure of COVID19.

    3. pgl

      I think I found a blog dumber than even Bruce Hall. It does at least tell us what Hanke was babbling about:

      https://wealthion.com/hot-6-7-inflation-to-run-through-the-end-of-2023-economist-steve-hanke/#:~:text=Hanke%20employed%20the%20Quantity%20Theory%20of%20Money%2C%20originally,correlated%20with%20the%20quantity%20of%20currency%20in%20circulation.

      Former Reagan Official Says Inflation Will Remain High Throughout 2023

      Formerly a senior economist on President Reagan’s Council of Economic Advisers, Steve Hanke accurately predicted inflation to reach 9% and is now calling for it to remain at 6% in 2023.

      Back in August of 2021, John Hopkins Professor Steve Hanke called for inflation to reach 9%, during which time inflation was running at 5.25%. This is about as accurate as one can get when it comes to economic predictions.

      Hanke employed the Quantity Theory of Money, originally formulated by Renaissance mathematician Nicolaus Copernicus, which, put simply, states that the price of goods is highly correlated with the quantity of currency in circulation.

      Milton Friedman popularized the theory in the US during the 1960’s, but it has largely died out among contemporary central bankers. Solidifying this ideological shift in early 2021, Fed Chair Jerome Powell stated, “there was a time when monetary policy aggregates were important determinants of inflation and that has not been the case for a long time.”

      ***
      Let’s stop there as the rest of this blog post is DUMB. To say the Quantity Theory of Money accurately predicted something is like saying a stopped clock is right twice a day. This discredited BS does not have a good forecast record over any extended period of time, And BTW – Milton Friedman was never a proponent of this discredited nonsense. For this blogger to say he was shows how stupid he is.

    4. Macroduck

      Another drive-by link. Goodie.

      Is this the same Steve Hanke who, after promoting currency boards as a means of snuffing out inflation and currency runs, insists that Argentina didn’t have a currency board, so the crash of the early 2000s were “not my fault” and he was never wrong? Kinda like a poor man’s Mundell. Yes, Argentina stopped operating a currency board in a strict sense, but the world is the world and paper models are paper models. Argentina did what Hanke advised, to a real-world approximation, and it failed. Millions of Argentines suffered, currency boards are now shunned, but all Hanke wanted people to know was “I wasn’t wrong.”

      This is your guy? And interest rates don’t matter? Sure.

      1. Macroduck

        Alright, I know that eyeball regression isn’t real economics, but let’s have a peak at pictures of GDP and inflation relative to M2 and the funds rate, just to see if Hanke’s insistence that he and only he understands how monetary policy works. Keep lags in mind or you’ll draw mistaken conclusions.

        Real GDP vs M2

        https://fred.stlouisfed.org/graph/?g=Vcdl

        Real GDP vs Fed Funds Rate

        https://fred.stlouisfed.org/graph/?g=VciO

        Coe PCE Deflator vs M2

        https://fred.stlouisfed.org/graph/?g=Vcdt

        Core PCE Deflator vs Fed Funds Rate

        https://fred.stlouisfed.org/graph/?g=VciC

        Anybody see a consistent pattern of behavior between M2 and either growth or inflation? How about the funds rate? Yep, the funds rate shows a much tighter link to the economy. Funny thing is, Hanke is a professor of applied, rather than theoretical economics, but he is and apparently always has been a theoretical ideologue. Who cares about evidence?

        Took about 7 minutes to get FRED to cough up these charts. With time for coffee. Don’t know why anybody would link without first a quick check of the data.

        1. Barkley Rosser

          MD,

          Yes, you have nailed it here very well. If Monetarism was right, our inflation rate would be many times what it is.

          But it is not. So there.

      2. pgl

        http://www.hacer.org/pdf/Schuler03.pdf

        What went wrong in Argentina? by Steve Hanke and Kurt Schuler – Central Banking Journal, February 2002

        I posted this link to show how much of a weasel Hanke really is. Here he and Schuler protest that Argentina’s woes were because they did not follow his advice. Seriously?

        I know a bit about this issue as the real problem was the insane fiscal irresponsibility during this period. Something called fiscal dominance which I guess Hanke never heard of.

        Speaking of uncontrolled deficit spending Bruce Hall recently went off on how this is the Biden agenda even though Biden has cut Trump’s deficits in half. I guess that is why Kelly Anne Conway told Brucie to find something else to whine about. Consistency is not Bruce’s thing.

  12. pgl

    JohnH a while back mocked the idea that Ukraine would regain control of Kherson. Well guess what?

    https://www.msn.com/en-us/news/world/russian-forces-could-face-rout-in-kherson-ukraine-facing-blackouts-as-russian-missiles-target-energy-live-updates/ar-AA13hZJa

    Russian military leadership in the occupied city of Kherson have fled across the Dnieper River, leaving behind new Russian recruits to try and stall the Ukraine military’s push to recapture the city, a Washington-based think tank says. “Using such inexperienced forces to conduct a delaying action could prompt a Russian rout if Ukrainian forces choose to press the attack,” the Institute for the Study of War says in its latest assessment of the war. The institute says that at least one Russian war blogger noted that the situation in Kherson is dire for frontline Russian troops that could find it ”virtually impossible” to evacuate. How to get those troops out and how to explain the flight from Kherson – which the Kremlin says it has annexed – to the Russian populace remain crucial issues for Russian leadership, the assessment says.

  13. pgl

    Putin is an evil person:

    https://internationalaffairs.co/ex-russian-diplomat-warns-putin-willing-to-sacrifice-20-million-soldiers-to-win-the-war-with-ukraine/#:~:text=Ex-Russian%20diplomat%20warns%20Putin%20willing%20to%20sacrifice%2020,other%20countries%20to%20whatever%20he%20wants%2C%E2%80%9D%20he%20said.

    A former Russian diplomat has warned that President Vladimir Putin will sacrifice ten to 20 million Russian soldiers to win the war in Ukraine, saying, “it’s a matter of principle, its a matter of survival” for the Russian leader. Speaking to Sky News’ Political Editor Beth Rigby, Boris Bondarev said that Putin “understands that if he loses the war with Ukraine, it will be the end of him.” You should have no doubt about it. He may sacrifice 10 or 20 million Russians just to win this war just to slaughter all Ukrainians because it’s a matter of principle. It’s a matter of political survival to him.” Bondarev quit Russia’s permanent mission at the United Nations in Geneva over the war in May. The exiled diplomat warned the West against failing to meet Putin’s threats head-on.

    1. Moses Herzog

      Did you get the strangest internal sensation that there is some video of Herschel Walker hanging out with Jeffrey Epstein that hasn’t gone public yet?? Perhaps Herschel will need Alan Pedowitz soon for legal representation or Pedowitz as a court witness that Herschel was wearing underwear during the entire massage. After all, that claim worked for Pedowitz.

Comments are closed.