Proceedings of the 1st International Conference on Statistics and Analytics, ICSA 2019, 2-3 August 2019, Bogor, Indonesia

Research Article

Nowcasting Indonesia's GDP Growth Using Dynamic Factor Model: Are Fiscal Data Useful?

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  • @INPROCEEDINGS{10.4108/eai.2-8-2019.2290478,
        author={Ardiana  Alifatussaadah and Anindya Diva  Primariesty and Agus Mohamad  Soleh and Andriansyah  Andriansyah},
        title={Nowcasting Indonesia's GDP Growth Using Dynamic Factor Model: Are Fiscal Data Useful?},
        proceedings={Proceedings of the 1st International Conference on Statistics and Analytics, ICSA 2019, 2-3 August 2019, Bogor, Indonesia},
        publisher={EAI},
        proceedings_a={ICSA},
        year={2020},
        month={1},
        keywords={dynamic factor model indonesian gdp nowcasting},
        doi={10.4108/eai.2-8-2019.2290478}
    }
    
  • Ardiana Alifatussaadah
    Anindya Diva Primariesty
    Agus Mohamad Soleh
    Andriansyah Andriansyah
    Year: 2020
    Nowcasting Indonesia's GDP Growth Using Dynamic Factor Model: Are Fiscal Data Useful?
    ICSA
    EAI
    DOI: 10.4108/eai.2-8-2019.2290478
Ardiana Alifatussaadah1,*, Anindya Diva Primariesty1, Agus Mohamad Soleh1, Andriansyah Andriansyah2
  • 1: Department of Statistics, IPB University, Bogor, 16680,Indonesia
  • 2: Fiscal Policy Agency, Ministry of Finance, Indonesia
*Contact email: ardianaalifatus@gmail.com

Abstract

Since introduced by Giannone et. al., GDP nowcasting models have been used in many countries, including Indonesia. Variables to select usually include housing and construction, income, manufacturing, labor, surveys, international trade, retails and consumptions. Interestingly, fiscal variables are excluded even though government expenditure is an integral part of the basic GDP identity. By employing the previous journal of quarter-to-quarter real GDP growth nowcasting technique by Bok et. al., this paper is aimed at testing the usefulness of inclusion of fiscal variables, in addition to 61 non-fiscal variables, in nowcasting Indonesia GDP. The results show, even though based on the fact that fiscal data have low correlation coefficients to GDP, the inclusion of fiscal data may help to produce a better early estimate of GDP growth based on a better RMSEP value.