An Indicator of Economic Sentiment for the Italian Economy
AbstractThe long and sustained expansion of the nineties has generated, especially in the US, widespread rumours about the “death of the cycle”. Nevertheless, towards the end of the last decade, it became clear that fluctuations of economic activity were far from being extinct. This has contributed greatly to a renewed interest among economists for the elaboration of statistical indicators capable of tracking and, if possible, anticipating the cyclical features of the economy. The aim of this paper is to build such an aggregate composite indicator for the Italian Economy, based on the ISAE surveys on households and those on the manufacturing, retail and construction sector. The first step of the analysis consists in using a dynamic factor model to extract a “common factor” from the different series of each survey, which may be interpreted as a composite confidence indicator. We then evaluate, for each survey, its in-sample and out-of sample properties, comparing them with those of the usual ISAE-EC Confidence indicators. Finally, we use again the dynamic factor model to build, from the sectoral Composite Indicator (CI), a Composite Aggregate Indicator (CAI) for the Italian economy, and test its ability in tracking the cyclical features of Italian aggregate GDP.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 42331.
Date of creation: 2002
Date of revision:
Confidence Indicators; Leading Indicators; Cyclical Analysis;
Other versions of this item:
- Giancarlo Bruno & Marco Malgarini, 2002. "An Indicator of Economic Sentiment for the Italian Economy," ISAE Working Papers 28, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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