Abstract
We propose a nowcasting approach for indicators assigned to the Sustainable Development Goal (SDG) 8, calling for decent work and economic growth. The nowcasts of SDG indicators are based on dynamic factor models. In this mixed frequency framework, we exploit information from a comprehensive set of quarterly data to nowcast annually observed SDG indicators. For the model selection and specification search we evaluate the nowcast properties of the models based on a pseudo real-time data set. More recent information on SDGs can disclose a possible deviation from the desired path at an early stage. As an example, we present nowcasts for SDG objectives in Austria for the year 2020. The design of our assessment follows the method and quantitative rules suggested by Eurostat. SDG 8 indicators are highly related to the underlying economic situation and the effects of the COVID-19 pandemic are clearly visible in the results for 2020.
Highlights
In 2017 the set was adjusted to 17 groups of indicators, each representing one of the Sustainable Development Goals (SDGs) adopted in 2015 by the United Nations within the framework of the 2030 Agenda for Sustainable Development
The nowcasting system we propose, relates quarterly variables published throughout the year to each of the six SDG indicators in a separate dynamic factor model
The comparison of root mean squared error (RMSE) for nowcasts based on the preferred dynamic factor models with simpler alternatives like random walks or ARIMA based one-step-ahead forecasts, reveals a better forecasting performance for all but one SDG
Summary
A further improvement of well-being metrics was one of the concluding recommendations in Stiglitz et al (2018). Indicators reflecting a broader view on the labour market, like the “inactive population due to caring responsibilities” or covering information on “people killed in accidents at work” or the “work at-risk-of-poverty rate” complement traditional economic variables Some of these indicators, are published with considerable time lag and there is not yet an established regular forecasting process covering them. We propose to transfer the application of the nowcasting technology from conventional economic variables to beyond GDP indicators This provides decision makers and participants in policy discussions with an up-to-date information set to assess progress towards targets or to design countervailing policy measures in case of an expected deviation from target, similar to discretionary stabilisation policy in the case of business cycle fluctuations. For indicator series where quantitative EU policy targets exist (like the national 2020-target for the employment rate), the
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