IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

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

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

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

in new window

Handle: RePEc:fau:fauart:v:62:y:2012:i:5:p:398-412
Contact details of provider: Postal:
Opletalova 26, CZ-110 00 Prague

Phone: +420 2 222112330
Fax: +420 2 22112304
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. G. Rünstler & K. Barhoumi & S. Benk & R. Cristadoro & A. Den Reijer & A. Jakaitiene & P. Jelonek & A. Rua & K. Ruth & C. Van Nieuwenhuyze, 2009. "Short-term forecasting of GDP using large datasets: a pseudo real-time forecast evaluation exercise," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 28(7), pages 595-611.
  2. Edward S. Knotek II & Shujaat Khan, 2011. "How do households respond to uncertainty shocks?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II.
  3. Junko Koeda, 2012. "How does yield curve predict GDP growth? A macro-finance approach revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 19(10), pages 929-933, July.
  4. Magdalena Borys & Roman Horváth & Michal Franta, 2009. "The effects of monetary policy in the Czech Republic: an empirical study," Empirica, Springer, vol. 36(4), pages 419-443, November.
  5. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  6. Dean Croushore, 2008. "Frontiers of real-time data analysis," Working Papers 08-4, Federal Reserve Bank of Philadelphia.
  7. Robert B. Barsky & Eric R. Sims, 2009. "Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence," NBER Working Papers 15049, National Bureau of Economic Research, Inc.
  8. Ali Al-Eyd & Ray Barrell & E. Philip Davis, 2009. "Consumer Confidence Indices And Short-Term Forecasting Of Consumption," Manchester School, University of Manchester, vol. 77(1), pages 96-111, 01.
  9. Candelon, Bertrand & Lutkepohl, Helmut, 2001. "On the reliability of Chow-type tests for parameter constancy in multivariate dynamic models," Economics Letters, Elsevier, vol. 73(2), pages 155-160, November.
  10. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
  11. Katerina Arnostova & David Havrlant & Lubos Ruzicka & Peter Toth, 2010. "Short-Term Forecasting of Czech Quarterly GDP Using Monthly Indicators," Working Papers 2010/12, Czech National Bank, Research Department.
  12. Kenneth D. West & Todd Clark, 2006. "Approximately Normal Tests for Equal Predictive Accuracy in Nested Models," NBER Technical Working Papers 0326, National Bureau of Economic Research, Inc.
  13. Tomáš Havránek & Roman Horváth & Jakub Matějů, 2012. "Monetary transmission and the financial sector in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 135-155, August.
  14. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
  15. Bachmann, Rüdiger & Sims, Eric R., 2012. "Confidence and the transmission of government spending shocks," Journal of Monetary Economics, Elsevier, vol. 59(3), pages 235-249.
  16. Elena Angelini & Gonzalo Camba‐Mendez & Domenico Giannone & Lucrezia Reichlin & Gerhard Rünstler, 2011. "Short‐term forecasts of euro area GDP growth," Econometrics Journal, Royal Economic Society, vol. 14(1), pages C25-C44, February.
  17. Matsusaka, John G & Sbordone, Argia M, 1995. "Consumer Confidence and Economic Fluctuations," Economic Inquiry, Western Economic Association International, vol. 33(2), pages 296-318, April.
  18. Jason Bram & Sydney Ludvigson, 1997. "Does consumer confidence forecast household expenditure?: A sentiment index horse race," Research Paper 9708, Federal Reserve Bank of New York.
  19. Martin Feldkircher, 2012. "Forecast Combination and Bayesian Model Averaging: A Prior Sensitivity Analysis," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 31(4), pages 361-376, 07.
  20. Annabelle Mourougane & Moreno Roma, 2003. "Can confidence indicators be useful to predict short term real GDP growth?," Applied Economics Letters, Taylor & Francis Journals, vol. 10(8), pages 519-522.
  21. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
  22. Mojon, Benoît & Peersman, Gert, 2001. "A VAR description of the effects of monetary policy in the individual countries of the euro area," Working Paper Series 0092, European Central Bank.
  23. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  24. Chauvet, Marcelle & Guo, Jang-Ting, 2003. "Sunspots, Animal Spirits, And Economic Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 7(01), pages 140-169, February.
  25. M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar Publishing.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:62:y:2012:i:5:p:398-412. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Herrmannova)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.