(Bloomberg) -- Tracking nighttime light data by satellite can help economists improve forecasts for exports, especially for developing nations, Federal Reserve Bank of Kansas City researchers said.
They found a statistically significant association between lights growth and U.S. export growth. Monthly lights data offer significant advantages over quarterly gross domestic product readings in forecasting U.S. exports, they said, adding that getting more frequent measurements -- such as every day -- could help further refine shipment projections.
“Although GDP growth is often used to approximate foreign demand, nighttime lights data from satellite images offer forecasters an attractive alternative,” the researchers wrote. “In particular, nighttime lights data are released more frequently and closer to real time than GDP data and are less likely to be mismeasured.”
The study is the latest example of economists and investors turning to space to better track activity around the planet below. The World Bank has worked with Silicon Valley’s Orbital Insight Inc. to study poverty in Sri Lanka, while BlackRock Inc. says images from space can help understand how Chinese companies are performing. SpaceKnow Inc. publishes proxies of economic activity across dozens of African nations based on nighttime lights.
Because exports rely on foreign demand, which is hard to measure, economists often use economic growth to approximate overseas appetite. That’s problematic because GDP data lag by a quarter or two in most countries, and the quality of foreign GDP data varies, said Nie, a senior economist, and Oksol, a research associate.
Nighttime light data may address both of those issues and help better project exports, the researchers wrote, citing the correlation between light levels and incomes. “Satellite data are likely more reliable than countries’ published measures,” they said.
The researchers said they used publicly available lights data from the U.S. National Oceanic and Atmospheric Administration, which images the entire planet at night, then used the images, with pixels about the size of a square kilometer, to build a numerical lights index.
Lights can be used to study GDP growth because it’s correlated with incomes: rising wealth means more consumer spending and business investment, and more nighttime lights are likely to appear, according to the researchers.
The data can be especially useful for tracking developing economies as they may have less reliable national statistics. Other research shows lights are a proxy for local economic growth in India and that growth in China may be greater than what official statistics say.
©2018 Bloomberg L.P.
With assistance from Jeff Kearns