Original scientific paper

https://doi.org/10.17535/crorr.2016.0007

Can confidence indicators forecast the probability of expansion in Croatia?

Mirjana Čižmešija orcid.org/0000-0002-9873-7291 ; Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia
Nataša Erjavec orcid.org/0000-0002-0943-2198 ; Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia

Abstract

The aim of this paper is to investigate how reliable are confidence indicators in forecasting the probability of expansion. We consider three Croatian Business Survey indicators: the Industrial Confidence Indicator (ICI), the Construction Confidence Indicator (BCI) and the Retail Trade Confidence Indicator (RTCI). The quarterly data, used in the research, covered the periods from 1999/Q1 to 2014/Q1. Empirical analysis consists of two parts. The non-parametric Bry-Boschan algorithm is used for distinguishing periods of expansion from the period of recession in the Croatian economy. Then, various nonlinear probit models were estimated. The models differ with respect to the regressors (confidence indicators) and the time lags. The positive signs of estimated parameters suggest that the probability of expansion increases with an increase in Confidence Indicators. Based on the obtained results, the conclusion is that ICI is the most powerful predictor of the probability of expansion in Croatia.

Keywords

confidence indicators; expansion; business survey; probit models

Hrčak ID:

157351

URI

https://hrcak.srce.hr/157351

Publication date:

5.4.2016.

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