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On the leading properties of Business and Consumer Surveys: new evidence from EU countries

Author

Listed:
  • Petar Sorić

    (Faculty of Economics and Business, University of Zagreb)

  • Blanka Škrabić Perić

    (University of Split, Faculty of Economics)

  • Marina Matošec

    (Faculty of Economics and Business, University of Zagreb)

Abstract

Ever since their initiation 60 years ago, the harmonized European Business and Consumer Surveys (BCS) have risen to the challenge of performing as a solid data pillar for quantifying leading indicators of economic activity. However, mainstream research mainly focuses on publicly available composite BCS confidence indicators and inspects their predictive accuracy. We depart from this stance by considering a battery of novel techniques for quantifying BCS-based leading indicators. We build upon the recently established weighted balance method, forecast disagreement, and surprise index. Additionally, we differ from the standpoint of rational expectations by introducing indicators of irrational sentiment and adaptive expectations, which have not previously been used in BCS studies of this sort. Our analysis in industry, consumer, and retail trade sectors of 28 European economies reveals that most of these novel techniques (especially irrational sentiment and adaptive expectations) produce more accurate predictions of economic activity than standard BCS benchmarks. These results are robust to several panel estimation procedures (heterogeneous panel Granger causality test and panel vector autoregressions, in particular).

Suggested Citation

  • Petar Sorić & Blanka Škrabić Perić & Marina Matošec, 2021. "On the leading properties of Business and Consumer Surveys: new evidence from EU countries," EFZG Working Papers Series 2101, Faculty of Economics and Business, University of Zagreb.
    • Handle: RePEc:zag:wpaper:2101
    as

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    References listed on IDEAS

    as
    1. Das, Prashant & Füss, Roland & Hanle, Benjamin & Russ, Isabel Nina, 2020. "The cross-over effect of irrational sentiments in housing, commercial property, and stock markets," Journal of Banking & Finance, Elsevier, vol. 114(C).
    2. P. Corredor & E. Ferrer & R. Santamaria, 2015. "The Impact of Investor Sentiment on Stock Returns in Emerging Markets: The Case of Central European Markets," Eastern European Economics, Taylor & Francis Journals, vol. 53(4), pages 328-355, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business and Consumer Surveys; Heterogeneous panel Granger causality; disagreement; irrational sentiment; adaptive expectations;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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