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  • Forecasting Current-Quarter...
    Nie, Jun; Oksol, Amy

    Economic review (Kansas City), 04/2018, Letnik: 103, Številka: 2
    Journal Article

    Forecasting export growth can be challenging. Export growth depends heavily on demand from foreign countries, which is difficult to directly measure. In practice, forecasters usually approximate strength in foreign demand through growth in foreign gross domestic product. But this approach has two problems. First, GDP data are released with a significant delay-for most countries, one to two quarters. Second, the quality of foreign GDP data varies. In some developing economies, GDP is poorly measured and thus may not be helpful in gauging those economies' true incomes (Johnson and others 2009; Deaton and Heston 2010).Recent research suggests nighttime lights data from satellites may be able to overcome both of these challenges, making them potentially useful in forecasting exports. Henderson and others (2012) show nighttime lights are useful in measuring GDP, as the amount of light in a given area is positively correlated with income in that area. In addition, satellite data are likely more reliable than countries' published measures. Furthermore, recent improvements in satellite technology have made satellite data available at higher frequencies than GDP data: monthly satellite data have been available since 2012, and daily data have been available since 2017. The increased frequency of these new data suggest nighttime lights could improve export forecasting based on foreign GDP. However, to the best of our knowledge, these data have not yet been tested in forecasting U.S. exports.In this analysis, we use nighttime lights data to forecast currentquarter U.S. export growth. We focus on current-quarter forecasts because a better estimate of current exports will establish a base for forecasting future exports. We find nighttime lights data are helpful overall in forecasting current-quarter U.S. export growth, largely due to more frequent data. In particular, we find that using monthly nighttime lights data generates a smaller forecast error than using quarterly foreign GDP When using quarterly data for both lights and foreign GDP, however, GDP data outperform lights data.Section I introduces the nighttime lights data from satellites and shows the relationship between the nighttime lights index and U.S. exports. Section II evaluates the performance of the lights data in forecasting U.S. exports.