November 2015

Nowcasting Indonesia

Matteo Luciani, Madhavi Pundit, Arief Ramayandi, and Giovanni Veronese


We produce predictions of the current state of the Indonesian economy by estimating a dynamic factor model on a dataset of eleven indicators (also followed closely by market operators) over the time period 2002 to 2014. 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 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.

Accessible materials (.zip)

Keywords: Dynamic Factor Models, Emerging Market Economies, Nowcasting


PDF: Full Paper

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Last Update: June 19, 2020