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Confidence Indicators and Their Relationship to Changes in Economic Activity

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  • Teresa Santero
  • Niels Westerlund

Abstract

This paper examines the usefulness of consumer and business surveys in assessing the cyclical position of the economy and for forecasting output movements. To that effect, after a brief review of the nature of sentiment measures, the empirical relationship between confidence indicators and output components is explored. Graphical examination, correlation analysis and Granger causality tests are used to asses that relationship. The paper finds that sentiment measures obtained from business surveys provide valuable information for the assessment of the economic situation and forecasting. However, the relationship between sentiment indicators and output varies considerably across countries and sentiment measures. It is also found that consumer confidence indicators are much less useful than business confidence indicators for economic analysis due to their much looser relationship with output movements ... Ce document examine l’utilité des enquêtes auprès des entreprises et des consommateurs dans les évaluations de la conjoncture et les prévisions des fluctuations de la production. A cette fin, après un bref examen de la nature des indicateurs de confiance, on analyse leur relations empiriques avec les composantes du PIB. Cette note s’appuie sur une étude graphique, correlations et sur des tests statistiques de causalité (Granger). La principale conclusion de cette étude est que les indicateurs du climat des affaires donnent des informations précieuses sur la situation économique courante et sur les perspectives à court terme. Il faut, cependant, noter que la relation entre ces indicateurs et la production est très differente selon les pays et selon la mesure de la confiance choisie. En outre, il apparaît que les indicateurs de confiance des consommateurs sont généralement moins étroitement liés aux fluctuations de la production que les indicateurs du climat des affaires, ce qui en ...

Suggested Citation

  • Teresa Santero & Niels Westerlund, 1996. "Confidence Indicators and Their Relationship to Changes in Economic Activity," OECD Economics Department Working Papers 170, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:170-en
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    File URL: http://dx.doi.org/10.1787/537052766455
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    Cited by:

    1. Pilar Bengoechea & Gabriel Pérez Quirós, 2004. "A useful tool to identify recessions in the euro area," European Economy - Economic Papers 2008 - 2015 215, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Ramalho, Esmeralda A. & Caleiro, António & Dionfsio, Andreia, 2011. "Explaining consumer confidence in Portugal," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 25-32, February.
    3. Vuchelen, Jef, 2004. "Consumer sentiment and macroeconomic forecasts," Journal of Economic Psychology, Elsevier, vol. 25(4), pages 493-506, August.
    4. Antonio Caleiro, 2006. "How is confidence related to unemployment in Portugal?," Applied Economics Letters, Taylor & Francis Journals, vol. 13(13), pages 887-890.
    5. Aleksejs Melihovs & Svetlana Rusakova, 2005. "Short-Term Forecasting of Economic Development in Latvia Using Business and Consumer Survey Data," Working Papers 2005/04, Latvijas Banka.
    6. Sara Serra & José R. Maria, 2008. "Forecasting investment: A fishing contest using survey data," Working Papers w200818, Banco de Portugal, Economics and Research Department.
    7. J.M. Berk, 1997. "Trade flows as a channel for the transmission of business cycles," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 50(201), pages 187-212.
    8. Brigitte Desroches & Marc-André Gosselin, 2002. "The Usefulness of Consumer Confidence Indexes in the United States," Staff Working Papers 02-22, Bank of Canada.
    9. Gagea, Mariana, 2014. "Modelling the Confidence in Industry in Romania and other European Member Countries Using the Ordered Logit Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 15-34, March.
    10. Roberto Golinelli & Giuseppe Parigi, 2003. "What is this thing called confidence? A comparative analysis of consumer confidence indices in eight major countries," Temi di discussione (Economic working papers) 484, Bank of Italy, Economic Research and International Relations Area.
    11. repec:eco:journ1:2017-05-50 is not listed on IDEAS
    12. Chris Aylmer & Troy Gill, 2003. "Business Surveys and Economic Activity," RBA Research Discussion Papers rdp2003-01, Reserve Bank of Australia.
    13. J.M. Berk, 1997. "Trade flows as a channel for the transmission of business cycles," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 50(201), pages 187-212.
    14. Croce, Roberto M. & Haurin, Donald R., 2009. "Predicting turning points in the housing market," Journal of Housing Economics, Elsevier, vol. 18(4), pages 281-293, December.
    15. Côté, Denise & Johnson, Marianne, 1998. "Consumer Attitudes, Uncertainty, and Consumer Spending," Staff Working Papers 98-16, Bank of Canada.
    16. Rossi, José Luiz J. & Laban, Sílvio A. Neto & Claro, Danny Pimentel & Bolzani, Luciana Corrêa, 2009. "Índice de Confiança do Empresário de Pequenos e Médios Negócios no Brasil (IC-PMN): Desenvolvimento e Consolidação," Insper Working Papers wpe_191, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    17. Claro, Danny P & Júnior, José L. R. & Laban Neto, Sílvio A. & Lucci, Cíntia R. & Bolzani, Luciana C. & Carvalho, Marina D. de, 2009. "Índice de Confiança do Empresário de Pequenos e Médios Negócios no Brasil (IC-PMN): Metodologia e Resultados Preliminares," Insper Working Papers wpe_158, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    18. Jana Juriová, 2015. "The role of foreign sentiment in small open economy," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(2), pages 57-68, June.

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