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Forecasting Aggregate Retail Sales with Google Trends

Author

Listed:
  • Elizaveta Golovanova

    (RANEPA)

  • Andrey Zubarev

    (RANEPA)

Abstract

As the internet grows in popularity, many purchases are being made in online stores. Google Trends is an online tool that collects data on user queries and forms categories from them. We forecast the dynamics of both aggregate retail sales and individual categories of food and non-food products using macroeconomic variables and Google Trends categories that correspond to various product groups. For each type of retail, we consider the best forecasting models from macroeconomic variables and try to improve them by adding trends. For these purposes, we use pseudo-out-of-sample nowcasting as well as recursive forecasting several months ahead. We conclude that forecasts for food and non-food products can improve significantly once trends are added to the models.

Suggested Citation

  • Elizaveta Golovanova & Andrey Zubarev, 2021. "Forecasting Aggregate Retail Sales with Google Trends," Russian Journal of Money and Finance, Bank of Russia, vol. 80(4), pages 50-73, December.
    • Handle: RePEc:bkr:journl:v:80:y:2021:i:4:p:50-73
    DOI: 10.31477/rjmf.202104.50
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    aggregated retail sales; food products; non-food products; Google Trends; big data; forecasting; linear regressions;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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