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Google Searches as a Means of Improving the Nowcasts of Key Macroeconomic Variables

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Author Info

  • Konstantin A. Kholodilin
  • Maximilian Podstawski
  • Boriss Siliverstovs
  • Constantin Bürgi

Abstract

The Google Insights data are a collection of recorded Internet searches for a huge number of the keywords, which are available since January 2004. These searches represent a kind of revealed perceptions of Internet users, which are a (possibly not entirely representative) sample of the general public. These data can be used to improve the short-term forecasts or nowcasts of various macroeconomic variables. In this paper, we compare the nowcasts of the growth rates of the real US private consumption based on both the conventional consumer confidence indicators and the Google indicators. The latter are extracted from the Google searches using the principal component analysis. It is shown that the Google indicators are especially successful at predicting private consumption in times of economic trouble, for they are 20% more accurate than the best alternative during the 2008m1-2009m5 forecast period. In addition, Google indicators are available at weekly frequency and not subject to revisions. This makes them an excellent source of information for the macroeconomic forecasting.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.343057.de/dp946.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 946.

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Length: III, 11 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwwpp:dp946

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Keywords: Google indicators; forecasting; principal components; US private consumption;

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