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Bayesian Variable Selection for Nowcasting Economic Time Series

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  • Steven L. Scott
  • Hal R. Varian

Abstract

We consider the problem of short-term time series forecasting (nowcasting) when there are more possible predictors than observations. Our approach combines three Bayesian techniques: Kalman filtering, spike-and-slab regression, and model averaging. We illustrate this approach using search engine query data as predictors for consumer sentiment and gun sales.

Suggested Citation

  • Steven L. Scott & Hal R. Varian, 2013. "Bayesian Variable Selection for Nowcasting Economic Time Series," NBER Working Papers 19567, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19567
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    1. Yan Carrière‐Swallow & Felipe Labbé, 2013. "Nowcasting with Google Trends in an Emerging Market," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 32(4), pages 289-298, July.
    2. David C. Wyld, 2010. "ASecond Lifefor organizations?: managing in the new, virtual world," Management Research Review, Emerald Group Publishing Limited, vol. 33(6), pages 529-562, May.
    3. Castle Jennifer L. & Doornik Jurgen A & Hendry David F., 2011. "Evaluating Automatic Model Selection," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 1-33, February.
    4. Concha Artola & Enrique Galán, 2012. "Tracking the future on the web: construction of leading indicators using internet searches," Occasional Papers 1203, Banco de España.
    5. Jennifer L. Castle & Xiaochuan Qin & W. Robert Reed, 2009. "How To Pick The Best Regression Equation: A Review And Comparison Of Model Selection Algorithms," Working Papers in Economics 09/13, University of Canterbury, Department of Economics and Finance.
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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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