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Title:Do Google searches help in nowcasting private consumption? A real-time evidence for the US PDF Logo
Authors:Kholodilin, Konstantin Arkadievich
Podstawski, Maximilian
Siliverstovs, Boriss
Issue Date:2010
Series/Report no.:Discussion papers // German Institute for Economic Research 997
Abstract:In this paper, we investigate whether the Google search activity can help in nowcasting the year-on-year growth rates of monthly US private consumption using a real-time data set. The Google-based forecasts are compared to those based on a benchmark AR(1) model and the models including the consumer surveys and financial indicators. According to the Diebold-Mariano test of equal predictive ability, the null hypothesis can be rejected suggesting that Google-based forecasts are significantly more accurate than those of the benchmark model. At the same time, the corresponding null hypothesis cannot be rejected for models with consumer surveys and financial variables. Moreover, when we apply the test of superior predictive ability (Hansen, 2005) that controls for possible data-snooping biases, we are able to reject the null hypothesis that the benchmark model is not inferior to any alternative model forecasts. Furthermore, the results of the model confidence set (MCS) procedure (Hansen et al., 2005) suggest that the autoregressive benchmark is not selected into a set of the best forecasting models. Apart from several Google-based models, the MCS contains also some models including survey-based indicators and financial variables. We conclude that Google searches do help improving the nowcasts of the private consumption in US.
Subjects:Google indicators
real-time nowcasting
principal components
US private consumption
JEL:C22
C53
C82
Document Type:Working Paper
Appears in Collections:DIW-Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW

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