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© 2022 International Monetary Fund WP/22/109

IMF Working Paper

African Department

Measuring Quarterly Economic Growth from Outer Space

Prepared by Robert C. M. Beyer, Yingyao Hu, and Jiaxiong Yao*

Authorized for distribution by Luca Ricci

June 2022

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

ABSTRACT: This paper presents a novel framework to estimate the elasticity between nighttime lights and quarterly economic activity. The relationship is identified by accounting for varying degrees of measurement errors in nighttime light data across countries. The estimated elasticity is 1.55 for emerging markets and developing economies, ranging from 1.36 to 1.81 across country groups and robust to different model specifications. The paper uses a light-adjusted measure of quarterly economic activity to show that higher levels of development, statistical capacity, and voice and accountability are associated with more precise national accounts data. The elasticity allows quantification of subnational economic impacts. During the COVID-19 pandemic, regions with higher levels of development and population density experienced larger declines in economic activity.

JEL Classification Numbers:	C10, E01, R12
Keywords:	Nighttime lights, economic measurement, quarterly GDP, national accounts, COVID-19.
Author’s E-Mail Address:	rcmbeyer@worldbank.org; yhu@jhu.edu; jyao@imf.org

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JEL Classification Numbers:	C10, E01, R12
Keywords:	Nighttime lights, economic measurement, quarterly GDP, national accounts, COVID-19.
Author’s E-Mail Address:	rcmbeyer@worldbank.org; yhu@jhu.edu; jyao@imf.org

Contents

• I. Introduction

• II. Related Literature

• III. Data

  • A. Nighttime Lights

  • B. GDP Growth and Other Data

• IV. Summary Statistics and Stylized Facts

  • A. Summary Statistics

  • B. Cross-Sectional and Temporal Relationships

  • C. Relationship for Different Country Groups

• V. Elasticity between Nighttime Lights and Economic Activity

  • A. Identification of the Elasticity: A Novel Approach

  • B. Baseline Estimates

  • C. Robustness

• VI. Combining Nighttime Lights and National Accounts

  • A. A Light-Adjusted GDP Measure

  • B. Shedding Light on National Accounts

• VII. Heterogeneous Subnational COVID-19 Impacts

• VIII. Conclusion

• References

• Appendices

• A. More Details on VIIRS Nighttime Light Data

• B. Zero Threshold and Sensor Recalibration

• C. Comparing Monthly with Annual Nighttime Lights

• D. Country Characteristics and Variance of Light Growth

• E. Data Winsorization

• F. Alternative Elasticity Estimation

• G. Light-Predicted GDP

• H. Summary Statistics for Regressions (17) and (18)

• I. COVID-19 Impact: Official and New GDP Growth

• J. Summary Statistics for Regression (19)

• K. Population Density and COVID-19 Impact

• List of Tables

• 1. Nighttime Lights and GDP Summary Statistics at Quarterly Frequency

• 2. VIIRS Nighttime Lights: Cross-Section and Temporal Relationships

• 3. VIIRS Nighttime Lights and Economic Growth at Quarterly Frequency

• 4. Elasticities between Nighttime Lights and GDP

• 5. Elasticities between Nighttime Lights and GDP, by Economic Structure

• 6. Optimal Weight on Nighttime Lighted-predicted GDP Growth

• 7. Systematic Difference between New and Official Growth Measures

• 8. Difference between New and Official Growth Measures

• 9. Differentiated Impact of COVID-19 at the Subnational Level

• E.1. Elasticities between Night Lights and GDP: Various Winsorization

• F.1. Elasticities between Nighttime Lights and GDP

• G.1. VIIRS Nighttime Lights: Predicting GDP Growth for EMDE

• H.1. Summary Statistics of Control Variables, Average 2013–2020

• I.1. COVID-19 Impact: Official and New GDP Growth Measures

• J.1. Summary Statistics of Variables at the Subnational Level

• List of Figures

• 1. VIIRS Nighttime Lights: June versus December

• 2. Elasticity Estimates with Various Choices of Winsorization

• A.1. VIIRS Nighttime Lights and Average Number of Observations

• B.1. Sum of VIIRS Nighttime Lights at the Country Level

• C.1. VIIRS Nighttime Lights, 2013–2019: Monthly versus Annual

• D.1. Country Characteristics and Variance of Nighttime Light Growth

• K.1. Nighttime Light Growth during COVID-19 and Population Density