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Are business tendency surveys useful to forecast private investment in Peru? A non-linear approach

Author

Listed:
  • Arenas, Paúl

    (Universidad Nacional Mayor de San Marcos)

  • Morales, Daniel

    (Rímac Seguros)

Abstract

We use the results of business tendency surveys (BTS) to forecast private investment growth in Peru, exploring the possible non-linear link between the BTS and private investment for forecasting purposes. We find that business confidence indices extracted from BTS, in particular the one calculated by the Central Reserve Bank of Peru (CRBP), are useful to forecast private investment growth in Peru. Moreover, models constructed only with indices extracted from BTS have a higher predictive power than models including control variables such as lagged GDP growth, inflation or interest rates. We also find that non-linear models are not superior to linear ones in forecasting Peruvian private investment. Additionally, the linear model finally selected would allow us to estimate real private investment growth for the current quarter with a 75-day lead with respect to the official publication date, almost twice the lead associated with the estimation methodology used by practitioners.

Suggested Citation

  • Arenas, Paúl & Morales, Daniel, 2013. "Are business tendency surveys useful to forecast private investment in Peru? A non-linear approach," Working Papers 2013-003, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2013-003
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    File URL: https://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2013/documento-de-trabajo-03-2013.pdf
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    Cited by:

    1. Winkelried, Diego, 2013. "Modelo de Proyección Trimestral del BCRP: Actualización y novedades," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 26, pages 9-60.

    More about this item

    Keywords

    Business Tendency Surveys; Business cycles; Private Investment; Forecasting;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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