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Do Confidence Indicators Help Predict Economic Activity? The Case of the Czech Republic

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Abstract

We examine whether confidence indicators—and their underlying components—improve the forecasts of future economic activity. Using quarterly data from the Czech Republic in 1999–2011, we estimate a vector autoregression model of the Czech economy (consisting of several commonly used macroeconomic variables) and compare its forecasting performance with models that additionally contain domestic and foreign confidence indicators. Our results suggest that although confidence indicators are contemporaneously well correlated with GDP, they fail to improve the GDP forecasts vis-?-vis the model based on macroeconomic variables only or vis-?-vis autoregressive models.

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Bibliographic Info

Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 62 (2012)
Issue (Month): 5 (November)
Pages: 398-412

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Handle: RePEc:fau:fauart:v:62:y:2012:i:5:p:398-412

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Keywords: confidence; GDP; vector autoregression; forecasting;

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References

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Cited by:
  1. Marek Rusnak, 2013. "Nowcasting Czech GDP in Real Time," Working Papers 2013/06, Czech National Bank, Research Department.

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