Fed economists ‘see the light’ on a new way to predict U.S. export growth

And it sounds brilliant:

Jun Nie, a senior economist at the Federal Reserve Bank of Kansas City, and research associate Amy Oksol this year published a study asserting that nighttime satellite pictures of lights on the ground can be reliably used in forecasting U.S. export growth. They studied monthly satellite pictures of several countries’ nighttime lights. They found greater accuracy in the data derived from those images when compared with export growth forecasts based on traditional methods—specifically GDP analysis and a “random walk.”

“Nighttime lights as viewed from satellites make up a unique dataset that provides information on nearly every place on earth,” Nie and Oksol explain in their research paper. “Satellite cameras take pictures of the entire planet at night (so lights can be better seen) and filter the images for various anomalies such as clouds and fires.” …

Although Nie believes the Kansas City Fed study, which focused on monthly images, is perhaps the first deep analysis of its kind, he points out that the concept of connecting nighttime lights with economic activity is not entirely new. Various studies dating to the 1990s—when only annual satellite images were available—have shown that pictures of night lights can be helpful in measuring a country’s GDP. This is because the amount of light in a particular area correlates to the area’s income levels.

Lockerroom readers may recall a discussion of how human progress can be measured by the increasing efficiency in creating light.

Jon Sanders / Research Editor and Senior Fellow, Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...