Nowcasting the economy

Using new indicators can help policymaking

Over the course of the pandemic, many analysts and even policymakers have turned to using non-traditional high-frequency indicators to better understand the state of the economy. Constructing indices from these indicators that properly reflect the state of more traditional measurements like gross domestic product in real-time is more of an art than a science at this point, given the paucity of long-term data when it comes to some of these indicators. A recent research paper in the Reserve Bank of India’s (RBI’s) monthly bulletin provides some idea of the challenges that need to be overcome. The authors note that central