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Nowcasting economic activity using transaction payments data

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  • Laura Felber
  • Dr. Simon Beyeler

Abstract

In this paper, we assess the value of high-frequency payments data for nowcasting economic activity. Focusing on Switzerland, we predict real GDP based on an unprecedented 'complete' set of transaction payments data: a combination of real-time gross settlement payment system data as well as debit and credit card data. Following a strongly data-driven machine learning approach, we find payments data to bear an accurate and timely signal about economic activity. When we assess the performance of the models by the initially published GDP numbers (pseudo real-time evaluation), we find a state-dependent value of the data: the payment models slightly outperform the benchmark models in times of crisis but are clearly inferior in 'normal' times. However, when we assess the performance of the models by revised and more final GDP numbers, we find payments data to be unconditionally valuable: the payment models outperform the benchmark models by up to 11% in times of crisis and by up to 12% in 'normal' times. We thus conclude that models based on payments data should become an integral part of policymakers' decision-making.

Suggested Citation

  • Laura Felber & Dr. Simon Beyeler, 2023. "Nowcasting economic activity using transaction payments data," Working Papers 2023-01, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2023-01
    as

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    File URL: https://www.snb.ch/en/publications/research/working-papers/2023/working_paper_2023_01
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Nowcasting; GDP; Machine learning; Payments data; COVID-19;
    All these keywords.

    JEL classification:

    • 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
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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