Work detail

Forecasting and Nowcasting Power of Confidence Indicators: Evidence for Central Europe

Author: Mgr. Herrmannová Lenka
Year: 2013 - summer
Leaders: prof. Roman Horváth Ph.D.
Work type: Doctoral
Language: English
Pages: 140
Awards and prizes:
Abstract: This thesis assesses the usefulness of confidence indicators for nowcasting and short term forecasting of
the economic activity in the Czech Republic and three other Central European countries. The predictive
power of both the Czech business confidence indicator and the customer confidence indicator is
examined using two empirical approaches. First we predict the likelihood of economic downturn using
logit models, later we estimate GDP growth out of sample forecasts in the framework of vector
autoregression models.
The results obtained from the downturn probability models confirm the ability of confidence indicators
(especially the business confidence indicator) to estimate the current economic situation, so called
nowcast. Results from the out-of-sample GDP growth value forecasting are ambiguous. Nevertheless the
customer confidence indicator significantly improved original forecasts based on the model with
standard macroeconomic variables and therefore we conclude in favour of its predictive power. Crosscountry
comparison confirms economic downturn nowcasting power of confidence indices in Hungary
and Poland and fails to confirm such an ability of Slovak confidence indicators. One-quarter-ahead
forecasts brought mixed results and therefore we conclude that nowcasting and forecasting properties of
confidence indicators are country-specific.




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