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Nowcasting Household Consumption in Azerbaijan

Author

Listed:
  • Nazrin Ramazanova

    (Central Bank of Azerbaijan Republic)

  • Ramiz Rahmanov

    (Central Bank of Azerbaijan Republic)

Abstract

The paper investigates the performance of various combinations of the single predictor MIDAS models and DFM model to nowcast household consumption in Azerbaijan. We evaluate the out-of-sample forecasting performance at horizons of up to four quarters ahead. All models use the information on monthly indicators released ahead of quarterly household consumption. The results show that both DFM model and single predictor MIDAS models with high-frequency regressors of retail trade turnover and Google Trends (arts & entertainment, sports, travel, hobbies & leisure) outperform the univariate benchmark model for one quarter ahead forecast. However, in comparison with MIDAS models, DFM shows better forecast performance.

Suggested Citation

  • Nazrin Ramazanova & Ramiz Rahmanov, 2021. "Nowcasting Household Consumption in Azerbaijan," Working Papers 2101, Central Bank of Azerbaijan Republic.
    • Handle: RePEc:aze:wpaper:2101
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    Keywords

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    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
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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