Big Data Information and Nowcasting: Consumption and Investment from Bank Transactions in Turkey

TL;DR

This paper demonstrates that bank transaction data can effectively nowcast Turkey's GDP by replicating consumption and investment figures in real time, especially useful for countries with delayed official statistics.

Contribution

It introduces a novel approach using big data from bank transactions to accurately nowcast macroeconomic indicators in Turkey.

Findings

Bank transaction data successfully nowcasts Turkish GDP.

Big data indicators are most valuable early in the nowcasting process.

The approach is especially useful for countries with delayed official data releases.

Abstract

We use the aggregate information from individual-to-firm and firm-to-firm in Garanti BBVA Bank transactions to mimic domestic private demand. Particularly, we replicate the quarterly national accounts aggregate consumption and investment (gross fixed capital formation) and its bigger components (Machinery and Equipment and Construction) in real time for the case of Turkey. In order to validate the usefulness of the information derived from these indicators we test the nowcasting ability of both indicators to nowcast the Turkish GDP using different nowcasting models. The results are successful and confirm the usefulness of Consumption and Investment Banking transactions for nowcasting purposes. The value of the Big data information is more relevant at the beginning of the nowcasting process, when the traditional hard data information is scarce. This makes this information specially relevant for those countries where statistical release lags are longer like the Emerging Markets.