An article in the Bank of England’s latest quarterly bulletin says that Internet search data can be used for economic policy making.
The article authored by Nick McLaren and Rachana Shanbhogue shows hos the vast database in search engines such as Google’s could be used to analyse various issues.
It said that the increasingly widespread use of the Internet by both businesses and consumers has led to the creation of a potentially useful data source: information on Internet search behaviour.
The authors wrote, "Internet search data have the potential to be useful for economic policy making."
"As further developments are made in this area, and the backrun of the data increases, these data are likely to become an increasingly useful source of information about economic behaviour."
They said that ‘nowcasting’, offered by search engines is an important aspect of policymaking.
They said, "Monitoring current economic activity closely is an important aspect of policymaking, but official economic statistics are generally published with a lag.
Consumer and business surveys, which are published more quickly than official counterparts, have typically been used to monitor current activity. This type of analysis is often called ‘nowcasting’, since it tries to explain current, rather than forecast future, activity."
The article also shows a correlation between the traditional economic data and volume of search items on Google.
The authors evaluated the the usefulness of the data for two specific markets: the labour and housing markets. They said that they are the two areas where the Internet has become an increasingly important tool for companies and the public alike.
However, the article also said that online search data has its limitations.
"There is only a short backrun, there is no information on the actual volume of searches, and as the index is based on a subsample the backrun of data can change," Shanbhogue and McLaren wrote.
