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Nowcasting in real time using popularity priors

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  • Monokroussos, George
  • Zhao, Yongchen

Abstract

We construct a “Google Recession Index” (GRI) using Google Trends data on internet search popularity, which tracks the public’s attention to recession-related keywords in real time. We then compare nowcasts made with and without this index using both a standard dynamic factor model and a Bayesian approach with alternative prior setups. Our results indicate that using the Bayesian model with GRI-based “popularity priors,” we could identify the 2008Q3 turning point in real time, without sacrificing the accuracy of the nowcasts over the rest of the sample periods.

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  • Monokroussos, George & Zhao, Yongchen, 2020. "Nowcasting in real time using popularity priors," International Journal of Forecasting, Elsevier, vol. 36(3), pages 1173-1180.
    • Handle: RePEc:eee:intfor:v:36:y:2020:i:3:p:1173-1180
    DOI: 10.1016/j.ijforecast.2020.03.004
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    Cited by:

    1. Yongchen Zhao, 2020. "Predicting U.S. Business Cycle Turning Points Using Real-Time Diffusion Indexes Based on a Large Data Set," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 16(2), pages 77-97, November.

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    More about this item

    Keywords

    Gibbs sampling; Factor models; Kalman filter; Real-time data; Google Trends; Monetary policy; Great Recession;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • 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
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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