Does confidence data help forecast business cycles? New evidence from Canada. Issue 21 (3rd May 2019)

• Record Type: Journal Article
• Authors: Moran, Kevin; Nono, Simplice Aimé; Rherrad, Imad
• Is Part Of: Applied economics. Volume 51:Issue 21(2019)
• Page Start: 2289
• Page End: 2312
• Publication Date: 2019-05-03
• Subjects: Business cycles -- leading indicators -- probability forecasting -- turning points -- confidence data; C22 -- C53 -- C55; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2018.1542119
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: This paper assesses the contribution of confidence – or sentiment – data for predicting Canadian economic slowdowns. A probit framework is applied to an indicator of the status of the Canadian business cycle produced by the OECD. Explanatory variables include all available Canadian data on sentiment (from four distinct surveys) as well as macroeconomic and financial data. Sentiment data are introduced either as individual variables, as simple averages (such as confidence indices ) and as confidence factors extracted from larger datasets containing all available sentiment data. Results indicate that the full potential of confidence data for forecasting Canadian business cycles obtains when factor models are used and all confidence data are utilized.