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The Use of Business Expectations in the Short-Term Forecasting of Economic Activity in Ukraine

Author

Listed:
  • Roman Lysenko

    (National Bank of Ukraine)

  • Nataliia Kolesnichenko

    (National Bank of Ukraine)

Abstract

This paper focuses on the predictive capability of business outlook survey findings in forecasting changes in Ukraine’s real GDP, and in its consumption and investment components. Survey findings have been generalized through the use of principal component analysis. The business outlook index compiled by the National Bank of Ukraine is used as an alternative measure. To forecast GDP and its components, we employ ARDL and VAR models, which factor in the estimated principal components, the business outlook index, and the business outlook survey findings for construction investment over the next 12 months. In estimating the predictive capability of the models, we use pseudo-out-of-sample forecasting. A comparison with actual data shows that annual GDP and consumption growth are best forecast in the current period by applying business outlook survey findings that have been generalized using a principal component analysis, and the first difference of the business outlook index.

Suggested Citation

  • Roman Lysenko & Nataliia Kolesnichenko, 2018. "The Use of Business Expectations in the Short-Term Forecasting of Economic Activity in Ukraine," Working Papers 02/2018, National Bank of Ukraine.
    • Handle: RePEc:ukb:wpaper:02/2018
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    More about this item

    Keywords

    business expectations; GDP; short-term forecasting;
    All these keywords.

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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