Nowcasting Household Consumption and Investment in Indonesia

  • . Tarsidin Bank Indonesia
  • . Idham Bank Indonesia
  • Robbi Nur Rakhman Bank Indonesia
Keywords: Nowcasting, Mixed Frequency Regression, Dynamic Factor Model

Abstract

It is imperative for the Central Bank to know the current state of the economy as the basis underlying projections of future economic conditions. To that end, current economic conditions, in this case household consumption and investment, could be predicted using nowcasting. In this research, a nowcasting model was developed for the two aforementioned macroeconomic variables using a Dynamic Factor Model (DFM). Theindicators used when nowcasting household consumption included: motor vehicle sales, total deposits, the lending rate on consumer loans, M1 and the rupiah exchange rate (NEER), while the indicators used for nowcasting investment included: cement sales, motor vehicle production, electric energy consumption, outstanding loans and M1. Accuracy testing showed that the nowcasting model for household consumption using DFM was sound, while the forecast error for nowcasting investment was significant but remained below the benchmark.

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Published
2018-01-31
How to Cite
Tarsidin, ., Idham, ., & Rakhman, R. (2018). Nowcasting Household Consumption and Investment in Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 20(3), 375-403. https://doi.org/10.21098/bemp.v20i3.858
Section
Articles