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Nowcasting Indonesia

Matteo Luciani, Madhavi Pundit (), Arief Ramayandi () and Giovanni Veronese ()
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Giovanni Veronese: Banca d’Italia

Empirical Economics, 2018, vol. 55, issue 2, No 10, 597-619

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.

Keywords: Nowcasting; Dynamic factor models; Emerging market economies (search for similar items in EconPapers)
JEL-codes: C32 C53 E37 O53 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s00181-017-1288-4

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