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Measuring economic sentiment using ordinary response options

  • Park, Inho (Department of Statistics, Pukyong National University) ;
  • Kim, Tae Yoon (Department of Statistics, Keimyung University)
  • Received : 2017.01.14
  • Accepted : 2017.02.17
  • Published : 2017.03.31

Abstract

Economic sentiment is typically measured using ordinary response options. The University of Michigan and the United States Conference Board are two widely used major indexes that have separately established independent consumer sentiment indexes based on three-level ordinary response options: positive, neutral, and negative. Notwithstanding, limited attention has been paid to the structural differences in their built-in formulas, which are referred to the disparate micro scoring schemes applied to an individual question. This paper examines the structural difference of the two indexes and then addresses situations where one is more reliable than the other. Real data from business tendency surveys of the Organization for Economic Cooperation and Development are used to illustrate our points empirically. As a conclusion, it is stressed that the two indexes should be handled with care when applied to economic sentiment comparison studies.

Acknowledgement

Supported by : Pukyong National University

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