Nowcasting Indonesia's GDP Growth: Are Fiscal Data Useful?

Alifatussaadah, Ardiana and Primariesty, Anindya Diva and Soleh, Agus Mohamad and Andriansyah, Andriansyah (2019): Nowcasting Indonesia's GDP Growth: Are Fiscal Data Useful? Published in: Proceedings of the 1st International Conference on Statistics and Analytics, ICSA 2019, 2-3 August 2019, Bogor, Indonesia (16 January 2020)

Abstract

Since introduced by Giannone et al. (2008), GDP nowcasting models have been used in many countries, including Indonesia. Variables to select usually include housing and construction, income, manufacturing, labor, surveys, international trade, retails and consumptions. Interestingly, fiscal variables are excluded even though government expenditure is an integral part of the basic GDP identity. By employing the Bok et al. (2018)’s quarter-to-quarter real GDP growth nowcasting technique, this paper is aimed at testing the usefulness of inclusion of fiscal variables, in addition to 61 non-fiscal variables, in nowcasting Indonesia GDP. The results show, even though based on the fact that fiscal data have low correlation coefficients to GDP, the inclusion of fiscal data may help to produce a better early estimate of GDP growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Dynamic Factor Model, Indonesian GDP, Nowcasting
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C55 - Large Data Sets: Modeling and Analysis; H - Public Economics > H6 - National Budget, Deficit, and Debt > H60 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

References

[1] Aruoba, S. B., Diebold, F. X., Nalewaik, J., Schorfheide, F., & Song, D. (2016). Improving GDP measurement: A measurement-error perspective. Journal of Econometrics, 191(2), 384–397. https://doi.org/10.1016/j.jeconom.2015.12.009

[2] Bok, B., Caratelli, D., Giannone, D., Sbordone, A. M., & Tambalotti, A. (2018). Macroeconomic Nowcasting and Forecasting with Big Data. Annual Review of Economics, 10(1), 615–643. https://doi.org/10.1146/annurev-economics-080217-053214

[3] Cuevas, Á., & Quilis, E. M. (2012). A factor analysis for the Spanish economy. SERIEs, 3(3), 311–338. https://doi.org/10.1007/s13209-011-0060-9

[4] Erhart, C., & Llorca, M. (2008). The sustainability of fiscal policy: Evidence from a panel of six South-Mediterranean countries. Applied Economics Letter, 15(10), 797–803. https://doi.org/10.1080/13504850600749156

[5] Giannone, D., Reichlin, L., & Small, D. (2008). Nowcasting: The real-time informational content of macroeconomic data. Journal of Monetary Economics, 55(4), 665–676. https://doi.org/10.1016/j.jmoneco.2008.05.010

[6] Jin, L., Fernández Pierna, J. A., Xu, Q., Wahl, F., De Noord, O. E., Saby, C. A., & Massart, D. L. (2003). Delaunay triangulation method for multivariate calibration. Analytica Chimica Acta, 488(1), 1–14. https://doi.org/10.1016/S0003-2670(03)00629-9

[7] Luciani, M., Pundit, M., Ramayandi, A., & Veronese, G. (2015). Nowcasting Indonesia | ADB Economics Working Paper No. 471 - December 2015. (471). Retrieved from http://dx.doi.org/10.17016/FEDS.2015.100.

[8] Luciani, M., Pundit, M., Ramayandi, A., & Veronese, G. (2018). Nowcasting Indonesia. Empirical Economics, 55(2), 597–619. https://doi.org/10.1007/s00181-017-1288-4

[9] Mondal, P., Shit, L., Goswami, S. (2014). Study of effectiveness of time series modeling (ARIMA) in forecasting stock prices. International Journal of Computer Science, Engineering and Applications (IJCSEA) Vol.4, No.2

[10] Samuel M, Okey L.E. 2015. The Relevance and Significant of Correlation in Social Science Research. European Centre for Research Training and Development UK.

[11] Tarsidin, ., Idham, ., & Rakhman, R. N. (2018). Nowcasting Household Consumption and Investment in Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 20(3), 375–403. https://doi.org/10.21098/bemp.v20i3.858

[12] Thuy, N. T. (n.d.). Fiscal Sustainability in Some ASEAN Countries : Evidence from a Panel Data Analysis. 1–40.