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Investigating the predictive ability of ONS big data‐based indicators

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  • George Kapetanios
  • Fotis Papailias

Abstract

This paper investigates the predictive ability of a brand new dataset that is based on big unstructured data published by the UK Office for National Statistics as “Faster Indicators of UK Economic Activity.” We consider some indicative ways for use in macroeconomic nowcasting. Even though the ONS confirms that the newly introduced big data‐based indicators are not constructed with forecasting purposes in mind, and applied researchers should be cautious when using them in this way, a simple out‐of‐sample nowcasting exercise reveals partial evidence that this dataset has some predictive power over GDP growth. Our results, which show a positive and encouraging first step towards the use of this type of data, suggest that national statistics agencies should allocate more resources in constructing big data‐based databases.

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  • George Kapetanios & Fotis Papailias, 2022. "Investigating the predictive ability of ONS big data‐based indicators," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(2), pages 252-258, March.
    • Handle: RePEc:wly:jforec:v:41:y:2022:i:2:p:252-258
    DOI: 10.1002/for.2805
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    1. Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2006. "A comparison of direct and iterated multistep AR methods for forecasting macroeconomic time series," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 499-526.
    2. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    3. Dario Buono & George Kapetanios & Massimiliano Marcellino & Gianluigi Mazzi & Fotis Papailias, 2018. "Big Data Econometrics: Now Casting and Early Estimates," BAFFI CAREFIN Working Papers 1882, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-162, April.
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