Use of Economic Tendency Surveys

Transcription

1 Use of Economic Tendency Surveys UN Workshop Hangzhou Klaus Abberger Swiss Economic Institute (KOF) of the ETH Zurich 8. October 2014

2 Outline Outline 1 Measurement of Assessments and Expectations of the Businesses and the Consumers Aims of ETS Customers of ETS results 2 Composite Indicators Motivation Classical Approach (NBER) Factor Analysis 3 Special Graphical Representations 4 Forecasting Time Series Methods Quantification 5 Economic Research

3 Outline Outline 1 Measurement of Assessments and Expectations of the Businesses and the Consumers Aims of ETS Customers of ETS results 2 Composite Indicators 3 Special Graphical Representations 4 Forecasting 5 Economic Research

4 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys p Base for business cycle relevant indicators

5 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys p Base for business cycle relevant indicators p Receive timely signals about general business cycle course

6 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys p Base for business cycle relevant indicators p Receive timely signals about general business cycle course p Change point detection

7 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys p Base for business cycle relevant indicators p Receive timely signals about general business cycle course p Change point detection p Information about assessments of current situation and expectations for the coming months of enterprises, e.g.

8 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys p Base for business cycle relevant indicators p Receive timely signals about general business cycle course p Change point detection p Information about assessments of current situation and expectations for the coming months of enterprises, e.g. p assessment of stocks

9 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys p Base for business cycle relevant indicators p Receive timely signals about general business cycle course p Change point detection p Information about assessments of current situation and expectations for the coming months of enterprises, e.g. p assessment of stocks p expectations about price changes

10 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys p Base for business cycle relevant indicators p Receive timely signals about general business cycle course p Change point detection p Information about assessments of current situation and expectations for the coming months of enterprises, e.g. p assessment of stocks p expectations about price changes p plans about employment

11 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys p Base for business cycle relevant indicators p Receive timely signals about general business cycle course p Change point detection p Information about assessments of current situation and expectations for the coming months of enterprises, e.g. p assessment of stocks p expectations about price changes p plans about employment p capacity utilization

12 Aims of Economic Tendency Surveys Aims of Economic Tendency Surveys The information covered by ETS goes beyond topics which are usually captured by conventional quantitative statistics. Examples include p assessments (e.g. capacities, stocks) p plans and expectations p bottlenecks

13 Business Climate in Afghanistan Business Climate in Afghanistan Source: Afghanistan Chamber of Commerce and Industries

14 Customers of ETS results Customers of ETS results p Respondents

15 Customers of ETS results Customers of ETS results p Respondents p Enterprises

16 Customers of ETS results Customers of ETS results p Respondents p Enterprises p Public and Media

17 Customers of ETS results Customers of ETS results p Respondents p Enterprises p Public and Media p Policymakers

18 Customers of ETS results Customers of ETS results p Respondents p Enterprises p Public and Media p Policymakers p Central Banks

19 Customers of ETS results Customers of ETS results p Respondents p Enterprises p Public and Media p Policymakers p Central Banks p Commercial Banks and financial markets

20 Customers of ETS results Customers of ETS results p Respondents p Enterprises p Public and Media p Policymakers p Central Banks p Commercial Banks and financial markets p Associations

21 Customers of ETS results Customers of ETS results p Respondents p Enterprises p Public and Media p Policymakers p Central Banks p Commercial Banks and financial markets p Associations p Experts

22 Customers of ETS results Customers of ETS results p Respondents p Enterprises p Public and Media p Policymakers p Central Banks p Commercial Banks and financial markets p Associations p Experts p Researchers

23 Customers of ETS results Customers of ETS results Two broad categories of users according to their needs: p Executives (e.g. senior business executives, politicians, senior civil servants responsible for government policy, senior personal in banks and financial institutions and the press and other media)

24 Customers of ETS results Customers of ETS results Two broad categories of users according to their needs: p Executives (e.g. senior business executives, politicians, senior civil servants responsible for government policy, senior personal in banks and financial institutions and the press and other media) p Analysts (e.g. economists and researchers operating in the academia, research institutions and governmental bodies)

25 Financial Times Financial Times

26 Financial Times Financial Times

27 Financial Times Financial Times

28 Financial Times Financial Times

29 The Economist The Economist

30 The Economist The Economist

31 The Wall Street Jounal The Wall Street Jounal

32 The Wall Street Jounal The Wall Street Jounal

33 Floyd Norris, May 2., 2014 Italian Confidence Undimmed by Statistics, Floyd Norris Floyd Norris, May 2., 2014

34 New York Times, May 2., 2014 New York Times, May 2., 2014 Italian Confidence Undimmed by Statistics, Floyd Norris

35 Users of ETS Users of ETS Users of economic tendency surveys Executives Analysts

36 Users of ETS Users of ETS Users of economic tendency surveys Executives Analysts

37 Outline Outline 1 Measurement of Assessments and Expectations of the Businesses and the Consumers 2 Composite Indicators Motivation Classical Approach (NBER) Factor Analysis 3 Special Graphical Representations 4 Forecasting 5 Economic Research

38 Composite Indicators Composite Indicators Economic Tendency Survey data results are a popular ingredient of composite indicators. The advantage of composite indicators over the individual component series are: p fewer false alarms and fewer missed turning points than its individual components

39 Composite Indicators Composite Indicators Economic Tendency Survey data results are a popular ingredient of composite indicators. The advantage of composite indicators over the individual component series are: p fewer false alarms and fewer missed turning points than its individual components p more stable lead-times

40 Composite Indicators Composite Indicators Economic Tendency Survey data results are a popular ingredient of composite indicators. The advantage of composite indicators over the individual component series are: p fewer false alarms and fewer missed turning points than its individual components p more stable lead-times p capacity to react to various sources of economic fluctuations

41 Composite Indicators Composite Indicators Economic Tendency Survey data results are a popular ingredient of composite indicators. The advantage of composite indicators over the individual component series are: p fewer false alarms and fewer missed turning points than its individual components p more stable lead-times p capacity to react to various sources of economic fluctuations p resilient to perturbations affecting only one of the components

42 Composite Indicators Composite Indicators p Soft/general questions vs. hard specific questions

43 Composite Indicators Composite Indicators p Soft/general questions vs. hard specific questions p Selection of indicators

44 Composite Indicators Composite Indicators p Soft/general questions vs. hard specific questions p Selection of indicators p Aggregation of indicators

45 Soft questions: Business Climate Soft questions: Business Climate

46 Ifo Business Climate Ifo Business Climate

47 KOF Business Situation KOF Business Situation 40 Balance s.a. good bad Source: KOF

48 KOF Business Situation Radar KOF Business Situation Radar Services Wholesaling good Construction Hotels.Retaurants poor Planning Manufacturing Finance Retailing

49 KOF Employment Indicator KOF Employment Indicator 15 KOF Employment Indicator Source: KOF

50 DG EFCIN Capacity utilisation in % DG EFCIN Capacity utilisation in % 90 % EA - Industry EA - Services EU - Industry EU - Services Source: DG ECFIN

51 Hard questions: European Union Hard questions: European Union Industrial Confidence p Assessment of order books p Assessment of current stock of finished goods p Production expectations

52 Hard questions: European Union Hard questions: European Union Service Confidence p Development of business situation p Development of demand p Expected demand

53 Hard questions: European Union Hard questions: European Union Retail Trade Confidence p Development of business activity p Assessment of stock of goods p Expected business activity

54 Hard questions: European Union Hard questions: European Union Construction Confidence p Assessment of order books p Employment plans

55 Hard questions: European Union Hard questions: European Union Consumer Confidence p Expected financial position of household p Expected general economic situation p Expected number of people unemployed p Household intention to save

56 DG EFCIN Economic Sentiment DG EFCIN Economic Sentiment

57 Approaches Approaches Question: How can we condense information contained in various indicators into one (or at least in a view) indicator(s)? p Classical (NBER) p Factor analysis

58 Classical Approach Classical Approach Steps in Classical Approach p Choose and classify indicators (de-trending, cross-correlations, turning points, co-spectral analysis) p Standardize indicators p Average indicators (and standardize)

59 Factor Analysis Factor Analysis Factor Models p a common force drives the dynamics of all variables p common force, also known as common factor, is typically of low dimension and is not directly observed because every macroeconomic variable embodies some idiosyncratic noise or short term movements p factor models clean every variable from these idiosyncratic movements and estimate the common component in every series

60 Factor Analysis Factor Analysis Let Z t be a N-dimensional multiple time series. It is assumed that (Z t ) admit a factor model representation with r common latent factors F t, Z t = ΛF t + e t (1) where e t is a N 1 vector of idiosyncratic disturbances.

61 OECD System of leading indicators OECD System of leading indicators To get some ideas about possible indicators look for example at the OECD website. The link to the indicator department is: OECD Indicator Department The link to the composition of OECD Leading Indicators is: OECD Leading Indicators

62 OECD System of leading indicators OECD System of leading indicators Source: OECD

63 OECD System of leading indicators OECD System of leading indicators Look at the different country indicators. There are various types of indicators. E.g.: p Production, stock of orders, employment, unfilled job vacancies, new car registrations, housing starts, nights spend in hotels p business tendency surveys p consumer surveys p various price figures and share prices, terms of trade, exchange rate, silver price p interest rates (spreads), bank credits p indicators of other countries... and much more.

64 Insee French Business Climate Insee French Business Climate Source: INSEE

65 Eurocoin Eurocoin Source: Bank of Italy

66 KOF Barometer KOF Barometer Economic Barometer and Reference Series KOF Economic Barometer (Index values; long-term average =100; left scale) Month-on-month change of the Swiss business cycle (Reference series; SECO / KOF, right scale)

67 Outline Outline 1 Measurement of Assessments and Expectations of the Businesses and the Consumers 2 Composite Indicators 3 Special Graphical Representations 4 Forecasting 5 Economic Research

68 Ifo Business Cycle Clock Ifo Business Cycle Clock Ifo World Economic Climate improvement Recovery / Upswing - Present economic situation: still bad, but improving - Economic expectations: positive I/ Consolidated Upturn / Boom - Present economic situation: good - Economic expectations: positive IV/2009 I/ III/2014 I/2011 I/2006 I/ III/2007 Present economic situation bad good I/2012 US Sub-prime credit crisis 4 I/2008 I/ Present economic situation: bad - Economic expectations: negative Trough / Recession 3 2 Economic expectations for the next six months 1 deterioration - Present economic situation: still good, but deteriorating - Economic expectations: negative Cooling-down / Downswing

69 Ifo Business Cycle Clock Ifo Business Cycle Clock

70 Example of a Business Monitor (Clock) Example of a Business Monitor (Clock) German Federal Statistical Office: Business Cycle Monitor Statistics Netherlands: Business Cylcel Tracer

71 DG EFCIN Turning point indicator for the euro area DG EFCIN Turning point indicator for the euro area Probability for upswing minus probability for downswing Source: OECD

72 Ifo Business Cycle Traffic Lights Ifo Business Cycle Traffic Lights FEB 1993 FEB 1995 FEB 1997 FEB 1999 FEB 2001 FEB 2003 FEB 2005 FEB 2007 FEB 2009 FEB 2011 FEB 2013 FEB 0.0 Source: Calculations of the Ifo Institute.

73 Outline Outline 1 Measurement of Assessments and Expectations of the Businesses and the Consumers 2 Composite Indicators 3 Special Graphical Representations 4 Forecasting Time Series Methods Quantification 5 Economic Research

74 ????casting????casting Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Time Quarter I Quarter II Quarter III

75 ????casting????casting Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Time Quarter I Quarter II Quarter III

76 ????casting????casting GDP/National Account t+45 t+65 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Time Quarter I Quarter II Quarter III

77 ????casting????casting ETS GDP/National Account t+45 t+65 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Time Quarter I Quarter II Quarter III

78 ????casting????casting Backcasting Nowcasting Forecasting ETS GDP/National Account t+45 t+65 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Time Quarter I Quarter II Quarter III

79 Forecasting with time series models Forecasting with time series models For example bridge models p n Y t = α + β i L i Y t + γ j L j Xt + ɛ t i=1 j=1

80 Quantification Quantification The use of ETS results in economic analysis requires a previous step of conversion of qualitative figures into quantitative data

81 Quantification Quantification The use of ETS results in economic analysis requires a previous step of conversion of qualitative figures into quantitative data p Workhorse is the balance statistic (percentage share of positive answers minus percentage share of negative answers)

82 Quantification Quantification The use of ETS results in economic analysis requires a previous step of conversion of qualitative figures into quantitative data p Workhorse is the balance statistic (percentage share of positive answers minus percentage share of negative answers) p Other approaches: probability method, regression approach

83 Quantification: Probability Approach Quantification: Probability Approach decrease no change increase

84 Quantification: Probability Approach Quantification: Probability Approach decrease no change increase 0

85 Quantification: Probability Approach Quantification: Probability Approach decrease no change increase 0

86 Quantification: Probability Approach Quantification: Probability Approach decrease no change increase 0

87 Quantification: Regression Approach Quantification: Regression Approach The regression approach uses the relationship between actual values (measured by official statistics) and respondents perception of the past (reported in the business surveys as judgements) as a yardstick for the quantification of respondents expectations about the future. Thus, quantitative expectations are function of a specific regression model rather than a specific probability distribution.

88 Outline Outline 1 Measurement of Assessments and Expectations of the Businesses and the Consumers 2 Composite Indicators 3 Special Graphical Representations 4 Forecasting 5 Economic Research

89 Economic research (macro and micro) Economic research (macro and micro) Expectation formation (on which information base?) Epidemiological Expectations Hypothesis Status Quo Bias

90 Economic research (macro and micro) Economic research (macro and micro) Permanent income hypothesis Credit access/ credit crunch indicators Transmission of shocks (industries/international)

91 CIRET Conference 2014 CIRET Conference 2014 p The job market situation, inflation and changes in consumption in relation to consumer survey results p Do Consumers in Europe Anticipate Future Inflation? Has it Changed Since the Beginning of the Financial Crisis?

92 CIRET Conference 2014 CIRET Conference 2014 p Quantification and Characteristics of Households Inflation Expectations in Switzerland p Synchronisation of economic cycles in Latin America: evidence from the World Economic Survey

93 CIRET Conference 2014 CIRET Conference 2014 p Shocks and the Expectations Formation Process. A Tale of Two Expectations p The Role of Expectations in Labor Supply Dynamics

94 CIRET Conference 2014 CIRET Conference and indeed: lots of business cycle analysis and forecasting!

95 CIRET Conference 2014 CIRET Conference and indeed: lots of business cycle analysis and forecasting!