Can economic perception surveys improve macroeconomic forecasting in Chile?
Abstract
We compare the timing, representativeness, questionnaires, and response aggregation of five Chilean economic perception surveys for macroeconomic forecasting, noting the shortcomings of composite indices combining questions with different focus and time perspective. We propose eight alternative measures distinguishing between current sentiment and future expectations and between personal and country-wide perceptions. Our results suggest that future and country-wide perceptions are formed with information other than personal and current sentiment, and that the latter are somewhat affected by the former. When analyzing its predictive ability for macro-aggregates, we find a rather strong relationship between personal and aggregate perceptions, consumption plans and actual consumption, especially of durables, outpacing the predictive ability of the existing synthetic indicator. On the business side, surveys seem to be stronger predicting employment than investment, while employment and investment seem to Granger-cause personal sentiment/expectations. Overall, while surveys of economic perceptions provide rich information, it is necessary to select the surveys and questions that are better revealing economic behavior.
Full text article
References
Aguirre, A., & Céspedes, L. F. (2004). Uso de análisis factorial dinámico para proyecciones macroeconómicas. Economía Chilena, 7(3), 35-46.
Albagli, E., & Luttini, E. (2015). Expectativas e inversión. Monetary Policy Report, Box V.1. Central Bank of Chile, June 2015.
Baffigi, A., Golinelli, R., & Parigi, G. (2004). Bridge models to forecast the Euro area GDP. International Journal of Forecasting, 20, 447-460.
Banerjee, A. (1992). A simple model of herd behavior. Quarterly Journal of Economics, 107(3), 797-817.
Box, G. E. P., & Jenkins, G. M. (1970). Time series analysis: Forecasting and control (1st ed.). Holden Day, San Francisco, USA.
Calvo, G., & Ricaurte, M. (2012). Indicadores sintéticos para la proyección de IMACEC en Chile (Working Paper 656). Central Bank of Chile.
Carlson, J.-A., & Parkin, M. (1975). Inflation expectations. Economica, 42, 123-138.
Ceballos, L., & González, M. (2012). Indicador de condiciones económicas. Economía Chilena, 15(1), 105-117.
Clark, T. E., & McCracken, M. W. (2001). Tests of equal forecast accuracy and encompassing for nested models. Journal of Econometrics, 105, 85-110.
Clark, T. E., & McCracken, M. W. (2005). Evaluating direct multistep forecasts. Econometric Reviews, 24, 369-404.
Clark, T. E., & West, K. D. (2007). Approximately normal tests for equal predictive accuracy in nested models. Journal of Econometrics, 138(1), 291-311.
Cobb, M., Echavarría, G., Filippi, P., García, M., Godoy, C., González, W., Medel, C. A., & Urrutia, M. (2011). Short-term GDP forecasting using bridge models: A case for Chile (Working Paper 626). Central Bank of Chile.
Diebold, F. X., & Mariano, R. S. (1995). Comparing predictive accuracy. Journal of Business and Economic Statistics, 13, 253-263.
Ghysels, E., Osborn, D., & Rodrigues, P. M. (2006). Forecasting seasonal time series. In G. Elliot, C. W. J. Granger, & A. Timmermann (Eds.), Handbook of economic forecasting (Vol. 1). Elsevier, North Holland.
Ghysels, E., Sinko, A., & Valkanov, R. (2007). MIDAS regressions: Further results and new directions. Econometric Reviews, 26(1), 53-90.
González, W. (2012). Un gran VAR bayesiano para la economía chilena. Economic Analysis Review, 27(2), 75-119.
González, W., & Rubio, H. (2013). Pronósticos con métodos shrinkage utilizando un gran base de datos (Working Paper 2013). Central Bank of Chile.
Harvey, D., Leybourne, S., & Newbold, P. (1997). Testing the equality of prediction mean squared errors. International Journal of Forecasting, 13, 281-291.
Karlsson, S. (2013). Forecasting with Bayesian vector autoregression. In G. Elliot & A. Timmermann (Eds.), Handbook of economic forecasting (Vol. 2, Part B). Elsevier, North-Holland.
Marcel, M., & Naudon, A. (2016). Transiciones laborales y la tasa de desempleo en Chile (Working Paper 787). Central Bank of Chile.
Medel, C. A., Pedersen, M., & Pincheira, P. M. (2016). The elusive predictive ability of global inflation. International Finance, 19(2), 120-146.
Nardo, M. (2003). The quantification of qualitative survey data: A critical assessment. Journal of Economic Surveys, 17(5), 645-668.
Nowzohour, L., & Stracca, L. (2017). More than a feeling: Confidence, uncertainty and macroeconomic fluctuations (Working Paper 2100). European Central Bank.
Pesaran, M. H. (1984). Expectation formation and macroeconomic modelling. In P. Malgrange & P. A. Muet (Eds.), Contemporary macroeconomic modelling. Oxford: Blackwell.
Pincheira, P. M. (2014). Predicción del empleo sectorial y total en base a indicadores de confianza empresarial. Economía Chilena, 17(1), 66-87.
Authors
Copyright (c) 2019 Nicolás Chanut, Mario Marcel C., Carlos A. Medel V
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Copyright / Open Access Policy: This journal provides immediate free open access to its content on the principle that making research freely available to the public supports a greater global exchange of ideas and is distributed under the terms and conditions of the Creative Commons Attribution License (CC BY).
The copyright will be retained by the authors. Articles are free for personal use but are protected by copyright in the sense that they may not be used for purposes other than personal use without the permission of the author.