Big data and official data: a cointegration analysis based on Google Trends and economic indicators

In this paper the relationship between the Industrial Production Index (IPI), the confidence index for the manufacturing sector and Google searches for several words linked to the economic situation is explored. In particular, time series referred to the period January 2004 - September 2016 on Italian data. An analysis of significant correlations between the selected indicators is achieved to explore the probable comovements of same. Adding one observation at a time since the first forewarning signs of the 2008 crisis, we find that a few Google searches and the IPI cointegrate, particularly during the strong downward trend leading to January 2009, while there is no cointegration between confidence indicators and the IPI. These results suggest that searches in google and the IPI or the confidence indexes are influenced by common circumstances. Finally forecasts of the IPI obtained through VECM models suggest that the evolution of the IPI can be well represented using the real time Gtrends selected variables.