Use googlenomics to track NGDP

Anybody who has been working on a trading floor will know the adrenalin rush one will experience when one of the major sets of macroeconomic data is published – for example US nonfarm payroll numbers. I think most dealers and analysts will recognise this and will acknowledge that it could become nearly addictive to get that feeling. However, I think that this might be a thing of the past due to the technological development.

Most macroeconomic data are published on a monthly or a quarterly basis. However, the economy does not develop in a discretionary fashion – rather the real economy develops continuously in time.

Now the technological development, however, gives us the possibility to follow the economic data real time. As more and more of the real economic happens on the internet or is reflected in some way on the internet the more easy it is to track economic developments in real time.

Just try to go to Google Trends and search words like “crisis”, “recession”, “Roubini” etc. and you will see that the trend in these searches tracks global macroeconomic developments in quite well. Another example is MIT’s so-called Billion Prices Project, which tracks consumer prices by monitoring prices on different retailers websites. The data is very strongly correlated with the official consumer price index for example in the US.

Market Monetarists are of course mostly interest in the development in nominal GDP – so he is a challenge to my reader – who can find the search word(s) on google trend that will track NGDP the best?

PS see also this paper by Google’s chief economist Hal Varian

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