An Overview of Economic Data Su, Chapter 2, section I

Classifications of Economic Data Many ways to classify economic data Most depend on some observable feature Classification helps to put the data in context

Primary vs. Secondary Data Primary: First Hand. Generated by researcher in experiments. Common in physical sciences. Can be replicated Secondary: Collected by another party, typically the government. –Non-experimental –Observational –Needs careful treatment

Time Series vs. Cross Sectional Time Series - “Dynamic” –Generated sequentially through time –A measurement of the same economic agent (individual, firm, etc.) –Dynamic Cross Sectional - “Static” –Generated across different agents –At same point in time –Static

Panel Data Combination of cross-sections over time Combines features of both types

Macroeconomic vs. Microeconomic Depends on level of aggregation Macro –Measures activity of entire economy –Reflects many agents behavior Micro –Measures activity of individuals

High-Frequency vs. Low Frequency Time Series and Panel distinction only Most series are “discrete” Categories –Real Time –High Frequency –Low Frequency Hourly, Daily, Weekly, Monthly, Annual

Frequency Considerations Little high frequency economic data exist Must use care when mixing frequencies Low frequency data can be treated as high frequency data aggregated over time Information is lost as high frequency data are aggregated

Stocks vs. Flows Stock data: Measures data at a point in time –Capital stock, end of month checking balance Flow data: Occurs over a period of time –Investment, monthly earnings and spending

Units of Measurement Data in levels: Absolute size of these variables convey sense of magnitude –Billions of Dollars –Millions of persons Data in changes: Sense of dynamics. Ratios. –Growth rates –Differences Economic data are typically expressed in dollar terms

Real vs. Nominal Data measured in dollars must be corrected for changes in prices Ruler of variable length

Indexes Relative comparison of values Commonly used –Price Indexes –Dow Jones Index –Industrial Production Laspeyers: t = (  P t xQ o )/(  P o xQ o )x100 –Base Weighted Paasche: t = (  P t xQ t )/(  P o xQ t )x100 –Current weighted

Ratios Growth Rate of GDP = (GDP t - GDP t-1 )/GDP t-1 x100 Inflation = (P t - P t-1 )/P t-1 x100 Interest = (D t - D t-1 )/D t-1 x100 D: Deposits Unemployment Rate = (LF-EMP)/LFx100 LF: Labor Force EMP: Level of employment

Historical Movements Use Plots to depict movements –“Time Shape” or “Time Path” Generate characteristics or “summary statistics” Conveys much information

First-Order Difference Or “First Difference”  Y t = Y t - Y t-1 for all t Change in Y If negative, Y fell If positive, Y rose Like Growth Rate GR(Y t ) = (Y t - Y t-1 )/Y t-1 =  Y t /Y t-1

Second-Order Difference Or “Second Difference”   Y t =  Y t -  Y t-1 = Y t - 2Y t-1 + Y t-2 Change in  Y