Regional nowcasting : an illustration using the Scottish economy

Koop, Gary and McIntyre, Stuart and Allan, Grant and Smith, Paul (2018) Regional nowcasting : an illustration using the Scottish economy. Sankhya B. pp. 1-25. ISSN 0976-8386 (In Press)

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    The delays in the release of key economic variables mean that policymakers do not know their current values. Quickly produced, high frequency, indicators are essen- tial in understanding regional performance in a timely fashion. Thus, there is a need for nowcasts, which are estimates of the current values of such variables (e.g. GDP, employ- ment, etc.). This paper nowcasts growth in a regional economy, taking Scotland, UK, as our example. Regional nowcasting is complicated due to issues around data timeliness and availability. For instance, key nowcast predictors such as industrial production are often unavailable at the sub-national level. Accordingly, we use data on some non-traditional variables and investigate whether UK aggregates, and indicators for neighbouring regions of the UK, can help nowcast Scottish GDP growth. We show that these models and methods can be successfully adapted for use in a regional setting, and so produce timely macroeconomic indicators for the regional economy.