Nowcasting Household Consumption and Investment in Indonesia

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.

Aplikasi Dynamic Factor Model untuk Nowcasting Pertumbuhan Ekonomi Regional Menggunakan Data Google Trends di Indonesia

“…Terdapat beberapa model ekonometrik yang dapat membentuk model nowcasting, yaitu bridge equations, Mixed Data Sampling (MIDAS), Dynamic Factor Model (DFM), dan Mixed Frequency VAR (Tarsidin, Idham, & Rakhman, 2018). DFM merupakan metode yang mampu mengakomodir berbagai kendala pada variabel bulanan yang digunakan, seperti penggunaan himpunan data yang besar, mampu menghubungkan informasi dari variabel bulanan terhadap variabel triwulanan, dan dapat digunakan pada data dengan rentang yang tidak sama.…”

Nowcasting Regional Economic Growth in Indonesia

“…The contribution of this study are as follows: First, nowcasting studies based on Indonesia are still focused at the national level. At that level, Tarsidin et al (2018) and Luciani et al (2018) performed nowcasting studies, while Dewati et al (2018) developed a nowcasting model in Sumatra, Java, and Eastern Indonesia. This study focuses on nowcasting at the regional level to provide the foundation for regional economic assessment.…”