On the Construction of the European Economic Sentiment Indicator

16 Pages Posted: 21 Dec 2009

See all articles by Sarah Gelper

Sarah Gelper

KU Leuven - Faculty of Business and Economics (FEB)

Christophe Croux

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Catholic University of Leuven (KUL) - Department of Applied Economics

Date Written: 0000

Abstract

Economic sentiment surveys are carried out by all European Union member states and are often seen as early indicators for future economic developments. Based on these surveys, the European Commission constructs an aggregate European Economic Sentiment Indicator (ESI). This paper compares the ESI with more sophisticated aggregation schemes based on statistical methods: dynamic factor analysis and partial least squares. The indicator based on partial least squares clearly outperforms the other two indicators in terms of comovement with economic activity. In terms of forecast ability, the ESI, constructed in a rather ad hoc way, can compete with the other indicators.

Suggested Citation

Gelper, Sarah and Croux, Christophe, On the Construction of the European Economic Sentiment Indicator (0000). Oxford Bulletin of Economics and Statistics, Vol. 72, Issue 1, pp. 47-62, February 2010. Available at SSRN: https://ssrn.com/abstract=1524532 or http://dx.doi.org/10.1111/j.1468-0084.2009.00574.x

Sarah Gelper (Contact Author)

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Christophe Croux

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium

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