NOWCASTING HOUSEHOLD CONSUMPTION AND INVESTMENT IN INDONESIA

Tarsidin Tarsidin, Idham () and Robbi Nur Rakhman ()
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Idham: Bank Indonesia
Robbi Nur Rakhman: Bank Indonesia

Bulletin of Monetary Economics and Banking, 2018, vol. 20, issue 3, 375-403

Abstract: It is imperative for the Central Bank to know the current state of the economy as the basis underlying projections of future economic conditions. To that end, current economic conditions, in this case household consumption and investment, could be predicted using nowcasting. In this research, a nowcasting model was developed for the two aforementioned macroeconomic variables using a Dynamic Factor Model (DFM). Theindicators used when nowcasting household consumption included: motor vehicle sales, total deposits, the lending rate on consumer loans, M1 and the rupiah exchange rate (NEER), while the indicators used for nowcasting investment included: cement sales, motor vehicle production, electric energy consumption, outstanding loans and M1. Accuracy testing showed that the nowcasting model for household consumption using DFM was sound, while the forecast error for nowcasting investment was significant but remained below the benchmark.

Keywords: Nowcasting; Mixed Frequency Regression; Dynamic Factor Model (search for similar items in EconPapers)
JEL-codes: C38 C53 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:20:y:2018:i:3f:p:375-403

DOI: 10.21098/bemp.v20i3.858

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