Wednesday, August 5, 2009

Department of Real-Time Economic Indicators

At Marginal Revolution, there's a link to a paper which links satellite light information (like that map) with economic activity.

It's a pretty neat tool, one the authors use to look at GDP numbers in places which are otherwise closed off (ie, Burma).

There is, however, another potential use: get close to real-time spatial economic data. This would be really useful for the Fed, which is forced to make decisions on monetary policy based on old data. Ideally, they would know the economy is set to behave in the future, but at the least real-time data is an improvement. It would allow, for instance, the Fed to realize in late 2007 that there was a serious economic shock, and force it to cut rates further (potentially avoiding some of the financial turmoil the next year).

Another indicator is using Google Trends to see what people are searching for. If it's 'bird flu', you can track how that spreads by city. If it's 'dodge ram', you might figure auto sales are going to go up. If it's both... maybe you have a spreading pandemic.

Of course, hedge funds might like this data too. You check out Google to figure out what the BLS data will be before they come out, and check out industrial production before everyone else. You can go hyper-micro, too, and see how individual towns and cities are doing. This kind of satellite data has been useful, apparently, in uncovering Burma's nuclear ambitions.

There's just no more privacy these days.

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