Download Components of Time Series

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 = (SPtxQo)/(SPoxQo)x100
– Base Weighted
• Paasche: t = (SPtxQt)/(SPoxQt)x100
– Current weighted
Ratios
• Growth Rate of
• GDP = (GDPt - GDPt-1)/GDPt-1x100
• Inflation = (Pt - Pt-1)/Pt-1x100
• Interest = (Dt - Dt-1)/Dt-1x100 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
Quarterly GDP 1947 - 1967
3500
3000
2500
1966
1964
1962
1961
1959
1957
1955
1954
1952
1950
1948
1947
2000
1500
1000
1990
1989
1987
1986
1984
1983
1981
1980
1978
1977
1975
1974
1972
1971
30 Year Mortgage Rates 1971-1991
20
15
10
5
0
1990
1989
1987
1985
1984
1982
1981
1979
1977
1976
1974
1973
1971
1970
Monthly Unemployment Rate
12
10
8
6
4
2
0
First-Order Difference
• Or “First Difference”
DYt = Yt - Yt-1 for all t
• Change in Y
• If negative, Y fell
• If positive, Y rose
• Like Growth Rate
GR(Yt) = (Yt - Yt-1)/Yt-1 = DYt/Yt-1
First Difference of Quarterly GDP
150
100
50
1966
1965
1963
1962
1960
1959
1957
1956
1954
1953
1951
1950
-100
1948
-50
1947
0
-10
-20
1966
1965
1963
1962
1960
1959
1957
1956
1954
1953
1951
1950
1948
1947
Growth in Quarterly GDP
30
20
10
0
0
-1
-2
-3
1991
1990
1988
1987
1986
1984
1983
1982
1980
1979
1978
1976
1975
1974
1972
1971
First Difference of Mortgage Rate
3
2
1
Second-Order Difference
• Or “Second Difference”
D2Yt = DYt - DYt-1 = Yt - 2Yt-1 + Yt-2
• Change in DY
Second Difference of Quarterly GDP
125
75
25
1967
1965
1964
1962
1961
1959
1958
1956
1955
1953
1952
1950
1949
-75
1947
-25