Tracking the Future on the Web: Construction of Leading Indicators Using Internet Searches

29 Pages Posted: 24 Mar 2012

See all articles by Concha Artola

Concha Artola

Banco de España - Servicio de Estudios

Enrique Martínez-Galán

School of Economics and Management (ISEG) of the University of Lisbon; Office for Economic Policy and International Affairs, GPEARI, Ministry of Finance, Portugal; Research Unit on Complexity and Economics; Studies Center for Africa, Asia and Latin America (CEsA)

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Date Written: March 23, 2012

Abstract

This paper reviews some of the applications that use the vast swathes of information provided by Internet user searches for economic analysis and forecasting. This enormous volume of information, available in real time, can be handled by analysts thanks to statistical tools such as “Google Insights for Search”, which allow trends in different areas of interest to be classified and evaluated. Previous work focused predominantly on the labour market, on the housing market, on retail sales and on consumer confidence. This paper presents a very specific application for the Spanish economy: British tourist inflows to Spain (the Spanish tourist industry's main customers). The improvement in the forecasting provided by the short-term models that include the G-indicator depends on the benchmark model. This does, however, allow an adjusted indicator of the inflow of British tourists to be obtained with a lead of almost one month.

This is but an initial step in the use of on-line searches for constructing leading indicators of economic activity. Other applications to be explored are car sales, consumer confidence and house purchases. The chief characteristic of these procedures is that, with time and the continuous growth of Internet use, results can only improve in the future. It should nonetheless be recalled that the construction of these G-indicators requires caution so as to avoid mistakes arising, inter alia, from the different use of language in different countries. Not taking due caution and blindly confiding in these indicators may lead to erroneous results being obtained.

Keywords: Google, forecasting, nowcasting, tourism

JEL Classification: C22, C53, C82, E17, E37, L83

Suggested Citation

Artola, Concha and Martínez-Galán, Enrique, Tracking the Future on the Web: Construction of Leading Indicators Using Internet Searches (March 23, 2012). Banco de Espana Occasional Paper No. 1203. Available at SSRN: https://ssrn.com/abstract=2027861 or http://dx.doi.org/10.2139/ssrn.2027861

Concha Artola (Contact Author)

Banco de España - Servicio de Estudios ( email )

28027 Madrid
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Enrique Martínez-Galán

School of Economics and Management (ISEG) of the University of Lisbon ( email )

Portugal
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HOME PAGE: http://pascal.iseg.utl.pt/~cesa/index.php/pt/home/455

Office for Economic Policy and International Affairs, GPEARI, Ministry of Finance, Portugal ( email )

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Portugal
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Research Unit on Complexity and Economics ( email )

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Studies Center for Africa, Asia and Latin America (CEsA) ( email )

Rua Miguel Lupi, 20
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Portugal
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