Friday, March 5, 2010

A Double-Dip?

The news hasn’t been so rosy lately. David Leonhardt’s column from The New York Times has the details, and some pessimistic opinions.

Without being pessimistic or optimistic, I’ll note that there are some statistical issues that can lead to this sort of thing in the short-run. In particular, a lot of data can be reported at the end of one calendar term, or at the start of the next one. This can generate an error pattern in the data called a moving average or MA process.

The way to get around that is to express the data as a moving average rather than a raw number. This is a simple thing to do in Excel: average 2 or more adjacent cells in a column, put the answer in one cell of an adjacent column, move down one row and repeat. Basically, this smoothes bumps.

Only time will tell, though, if we are currently experiencing bumps that need to be smoother, or a double-dip.

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