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Nowcasting Indonesia

Author

Listed:
  • Matteo Luciani

    () (Board of Governors of the Federal Reserve System)

  • Madhavi Pundit

    () (Asian Development Bank)

  • Arief Ramayandi

    () (Asian Development Bank)

  • Giovanni Veronese

    () (Banca d’Italia)

Abstract

Abstract We produce predictions of the current state of the Indonesian economy by estimating a dynamic factor model on a dataset of 11 indicators (followed closely by market operators) over the 2002–2014 period. Besides the standard difficulties associated with constructing timely indicators of current economic conditions, Indonesia presents additional challenges typical to emerging market economies where data are often scant and unreliable. By means of a pseudo-real-time forecasting exercise, we show that our model outperforms univariate benchmarks, and it does comparably well with predictions of market operators. Finally, we show that when quality of data is low, a careful selection of indicators is crucial for better forecast performance.

Suggested Citation

  • Matteo Luciani & Madhavi Pundit & Arief Ramayandi & Giovanni Veronese, 2018. "Nowcasting Indonesia," Empirical Economics, Springer, vol. 55(2), pages 597-619, September.
    • Handle: RePEc:spr:empeco:v:55:y:2018:i:2:d:10.1007_s00181-017-1288-4
    DOI: 10.1007/s00181-017-1288-4
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    Citations

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    Cited by:

    1. Bragoli, Daniela & Modugno, Michele, 2017. "A now-casting model for Canada: Do U.S. variables matter?," International Journal of Forecasting, Elsevier, vol. 33(4), pages 786-800.
    2. Bragoli, Daniela, 2017. "Now-casting the Japanese economy," International Journal of Forecasting, Elsevier, vol. 33(2), pages 390-402.
    3. repec:eee:intfor:v:33:y:2017:i:4:p:915-935 is not listed on IDEAS
    4. repec:spr:empeco:v:53:y:2017:i:1:d:10.1007_s00181-017-1254-1 is not listed on IDEAS
    5. Modugno, Michele & Soybilgen, Barış & Yazgan, Ege, 2016. "Nowcasting Turkish GDP and news decomposition," International Journal of Forecasting, Elsevier, vol. 32(4), pages 1369-1384.
    6. Tony Chernis & Rodrigo Sekkel, 2017. "A dynamic factor model for nowcasting Canadian GDP growth," Empirical Economics, Springer, vol. 53(1), pages 217-234, August.
    7. Dahlhaus, Tatjana & Guénette, Justin-Damien & Vasishtha, Garima, 2017. "Nowcasting BRIC+M in real time," International Journal of Forecasting, Elsevier, vol. 33(4), pages 915-935.

    More about this item

    Keywords

    Nowcasting; Dynamic factor models; Emerging market economies;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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