The Relationship between Changes in the Economic Sentiment Indicator and Real GDP Growth: A Time-Varying Coefficient Approach
Economics Bulletin, Vol. 30, No. 1, pp. 837-846, 2010
Posted: 28 Mar 2010 Last revised: 1 Apr 2010
Date Written: March 1, 2010
The aim of this paper is to capture the time-varying effects of the relationship between changes in the Economic Sentiment Indicator (ESI) and economic growth. We use penalized regression splines to estimate the different point effects over time. Evidence from six European countries supports the idea that the elasticity of the ESI is time-varying.
Keywords: Economic Sentiment Indicator, Real GDP Growth, Thin Plate Regression Splines, Time-Varying Coefficient Model
JEL Classification: C, C5
Suggested Citation: Suggested Citation