Forecasting GDP growth from the outer space

We evaluate the usefulness of satellite-based data on nighttime lights for the prediction of annual GDP growth across a global sample of countries. Going beyond traditional measures of luminosity, such as the sum of lights within a country’s borders, we propose several innovative distribution- and location-based indicators attempting to extract new predictive information from the night lights data. Whereas our ?ndings are generally favorable to the use of the night lights data to improve the accuracy of simple autoregressive model-based forecasts, we also ?nd a substantial degree of heterogeneity across countries on the estimated relationships between light emissions and economic activity: individually estimated models tend to outperform pooled speci?cations, even though the latter provide more ef?cient estimates for out-of-sample forecasting. The estimation uncertainty affecting the country-speci?c estimates tends to be more pronounced for low and lower middle income countries. We conduct bootstrapped inference in order to evaluate the statistical signi?cance of our results.