- Volume 24 Issue 5
An Economic Sentiment Indicator(ESI) is a composite indicator of business survey indices(BSI) and consumer survey indices(CSI). The ESI designed to reflect economic agents' (this includes producers and consumers) overall perceptions of economic activity in a one-dimensional index. The European Commission has published an ESI since 1985. This paper demonstrates the construction of an ESI for the Korean economy. The BSI and CSI components (having a high correlation and a leading feature with respect to GDP) are selected to construct the ESI and they are aggregated using a weighted average and then scaled to have a long-term average of 100 and a standard deviation of 10. Thus values greater than 100 indicate an above-average economic sentiment and vice versa. The newly constructed Korean ESI that extends to January 2003 shows a good tracking performance of GDP and adequately reflects the overall perception of economic activity.
Economic Sentiment Indicator(ESI);business survey index(BSI);onsumer survey index(CSI);gross domestic product(GDP)
- Gayer, C. and Genet, J. (2006). Using factor models to construct composite indicators from BCS data - A comparison with European Commission confidence indicators, European Economy, 240.
- Bruno, G. and Malgarini, M. (2002). An Indicator of Economic Sentiment for the Italian Economy, Working Paper No. 28/02, Institute for Studies and Economic Analysis, Rome.
- Bry, G. and Boschan, C. (1971). Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, NBER Technical Paper 20.
- European Commission (1997). The joint harmonized EU programme of business and consumer surveys, European Economy, 6.
- European Commission (2007). The joint harmonized EU programme of business and consumer surveys - users guide.
- Gelper, S. and Croux, C. (2007). The Predictive Power of the European Economic Sentiment Indicator, K.U.Leuven, FETEW Research Report KBI 0707, 1-15.
- Hodrick, R. and Prescott, E. (1997). Postwar U.S. Business Cycles: An Empirical Investigation, Journal of Money, Credit and Banking, 29, 1-16. https://doi.org/10.2307/2953682
- Mazzi, G., Moauro, F. and Savio, G. (2005). Theory and applications of univariate and multivariate models for temporal disaggregation, European Commission, Eurostat, Working papers and studies.
- Stock, J. and Watson, M. (2002). Forecasting using principal components from a large number of predictors, The Journal of the American Statistical Association, 97, 1167-1179. https://doi.org/10.1198/016214502388618960
- Predictability of Consumer Expectations for Future Changes in Real Growth vol.28, pp.3, 2015, https://doi.org/10.5351/KJAS.2015.28.3.457
- Information Variables for the Predictability of Future Changes in Real Growth vol.26, pp.2, 2013, https://doi.org/10.5351/KJAS.2013.26.2.253
- A study on the improvement of the economic sentiment index for the Korean economy vol.26, pp.6, 2015, https://doi.org/10.7465/jkdi.2015.26.6.1335