Forecasting GDP Growth from Outer Space

We evaluate the usefulness of satellite‐based data on night‐time lights for forecasting GDP growth across a global sample of countries, proposing innovative location‐based indicators to extract new predictive information from the lights data. Our findings are generally favourable to the use of night lights data to improve the accuracy of model‐based forecasts. We also find a substantial degree of heterogeneity across countries in the relationship between lights and economic activity: individually estimated models tend to outperform panel specifications. Key factors underlying the night lights performance include the country's size and income level, logistics infrastructure, and the quality of national statistics.