Nowcasting Indonesia

28 Pages Posted: 30 Dec 2015

See all articles by Matteo Luciani

Matteo Luciani

Board of Governors of the Federal Reserve System

Madhavi Pundit

Asian Development Bank

Arief Ramayandi

Asian Development Bank - Economic Research

Giovanni Veronese

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: December 2015


We produce predictions of the current state of the Indonesian economy by estimating a Dynamic Factor Model on a dataset of 11 indicators (also followed closely by market operators) over the time period 2002 to 2014. Besides the standard difficulties associated with constructing timely indicators of current economic conditions, Indonesia presents additional challenges typical to emerging market economies where data are often scant and unreliable. By means of a pseudo-real-time forecasting exercise we show that our model outperforms univariate benchmarks, and it does comparably with predictions of market operators. Finally, we show that when quality of data is low, a careful selection of indicators is crucial for better forecast performance.

Keywords: Dynamic Factor Models, emerging market economies, nowcasting

JEL Classification: C32, C53, E37, O53

Suggested Citation

Luciani, Matteo and Pundit, Madhavi and Ramayandi, Arief and Veronese, Giovanni Furio, Nowcasting Indonesia (December 2015). Asian Development Bank Economics Working Paper Series No. 471, Available at SSRN: or

Matteo Luciani

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Madhavi Pundit

Asian Development Bank ( email )

Arief Ramayandi (Contact Author)

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila

Giovanni Furio Veronese

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
+49 621 189 1886 (Phone)
+49 621 189 1884 (Fax)

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