Economics at your fingertips  

Using Payments Data to Nowcast Macroeconomic Variables During the Onset of COVID-19

James Chapman () and Ajit Desai

Staff Working Papers from Bank of Canada

Abstract: The COVID-19 pandemic and the resulting public health mitigation have caused large-scale economic disruptions globally. During this time, there is an increased need to predict the macroeconomy’s short-term dynamics to ensure the effective implementation of fiscal and monetary policy. However, economic prediction during a crisis is challenging because of the unprecedented economic impact, which increases the unreliability of traditionally used linear models that use lagged data. We help address these challenges by using timely retail payments system data in linear and nonlinear machine learning models. We find that compared to a benchmark, our model has a roughly 15 to 45% reduction in Root Mean Square Error when used for macroeconomic nowcasting during the global financial crisis. For nowcasting during the COVID-19 shock, our model predictions are much closer to the official estimates.

Keywords: Econometric and statistical methods; Payment clearing and settlement systems (search for similar items in EconPapers)
JEL-codes: C55 E52 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021-01
New Economics Papers: this item is included in nep-big, nep-cmp, nep-mac and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link) Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

Page updated 2023-01-25
Handle: RePEc:bca:bocawp:21-2