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Sectoral Survey-based Confidence Indicators for Europe

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  • Andrea Carriero
  • Massimiliano Marcellino

Abstract

In this paper we analyze a novel dataset of Business and Consumer Surveys, using dynamic factor techniques, to produce composite coincident indices (CCIs) at the sectoral level for the European countries and for Europe as a whole. Few CCIs are available for Europe compared to the US, and most of them use macroeconomic variables and focus on aggregate activity. However, there are often delays in the release of macroeconomic data, later revisions, and differences in the definition of the variables across countries, while the surveys are timely available, not subject to revision, and fully comparable across countries. Moreover, there are substantial discrepancies in activity at the sectoral level, which justifies the interest in a sectoral disaggregation. Compared to the Confidence Indicators produced by the European Commission, which are based on a simple average of the aggregate survey answers, we show that factor based CCIs, using survey answers at a more disaggregate level, produce higher correlation with the reference series for the majority of sectors and countries.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 320.

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Date of creation: 2007
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Handle: RePEc:igi:igierp:320

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  1. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2003. "The Generalized Dynamic Factor Model. One-Sided Estimation and Forecasting," LEM Papers Series 2003/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. Artis, Michael J & Krolzig, Hans-Martin & Toro, Juan, 1999. "The European Business Cycle," CEPR Discussion Papers 2242, C.E.P.R. Discussion Papers.
  3. Lucrezia Reichlin & Mario Forni & Marc Hallin & Marco Lippi, 2001. "Coincident and leading indicators for the Euro area," ULB Institutional Repository 2013/10137, ULB -- Universite Libre de Bruxelles.
  4. Altissimo, Filippo & Bassanetti, Antonio & Cristadoro, Riccardo & Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia & Veronese, Giovanni, 2001. "EuroCOIN: A Real Time Coincident Indicator of the Euro Area Business Cycle," CEPR Discussion Papers 3108, C.E.P.R. Discussion Papers.
  5. Michael ARTIS & Massimiliano MARCELLINO & Tommaso PROIETTI, 2002. "Dating the Euro Area Business Cycle," Economics Working Papers ECO2002/24, European University Institute.
  6. Kim, C-J., 1991. "Dynamic Linear Models with Markov-Switching," Papers 91-8, York (Canada) - Department of Economics.
  7. Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583.
  8. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-96, November.
  9. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
  10. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  11. Diebold, Francis X & Rudebusch, Glenn D, 1996. "Measuring Business Cycles: A Modern Perspective," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 67-77, February.
  12. Boivin, Jean & Ng, Serena, 2006. "Are more data always better for factor analysis?," Journal of Econometrics, Elsevier, vol. 132(1), pages 169-194, May.
  13. Michael Artis, 2003. "Is there a European Business Cycle?," CESifo Working Paper Series 1053, CESifo Group Munich.
  14. Christian Gayer & Julien Genet, 2006. "Using factor models to construct composite indicators from BCS data - a comparison with European Commission confidence indicators," European Economy - Economic Papers 240, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  15. Filardo, Andrew J, 1994. "Business-Cycle Phases and Their Transitional Dynamics," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 299-308, July.
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Cited by:
  1. Andrea Carriero & Massimiliano Marcellino, 2007. "Monitoring the Economy of the Euro Area: A Comparison of Composite Coincident Indexes," Working Papers 319, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Cecilia Frale & Massimiliano Marcellino & Gian Luigi Mazzi & Tommaso Proietti, 2008. "A Monthly Indicator of the Euro Area GDP," Economics Working Papers ECO2008/32, European University Institute.
  3. Lahiri, Kajal & Monokroussos, George, 2013. "Nowcasting US GDP: The role of ISM business surveys," International Journal of Forecasting, Elsevier, vol. 29(4), pages 644-658.
  4. Nicoletta Pashourtidou & Andreas Tsiaklis, 2011. "An Analysis of Firms’ Expectations about Activity and Employment," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 5(1), pages 71-85, June.

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