The Nature of the Official Monthly Estimates of U.S. GDP Quarterly Growth Rates

The accuracy of the U.S. Bureau of Economic Analysis (BEA) monthly estimates of the nation’s quarterly nominal and real gross domestic product (GDP) growth rates are examined using a novel analytical framework based on the flexible two-piece generalized distribution. An analysis of the estimation errors reveals that both GDP estimates are not strictly rational. Instead, the evidence suggests that human cognitive biases may impact, directly or indirectly, the specific protocols used, the direction, and the accuracy of the estimates. These impacts are often different during a recession than during normal periods, as defined by the National Bureau of Economic Research (NBER)