Are the Confidence Indicators Meaningful for Forecasting Real Economy?
Are the Confidence Indicators Meaningful for Forecasting Real Economy?

Testing Power of Confidence Indicators for Industry Output, Prices and Employment in the Visegrád Group Countries

Summary/Abstract: This paper examines predictive power of the confidence indicators for developments in industrial output, producer prices and employment in the Czech and Slovak Republics, Hungary, and Poland (V4 countries). The Granger Causality tests are used for establishing potential causation between the confidence indicators and real economy data. The best OLS models with autoregressive terms complemented by confidence indicators are selected and their predictive accuracy is tested against the ARMA benchmarks with the Diebold-Mariano test. All OLS models performed better than the naïve ones .We conclude that the actual CI variables seem to reflect future patterns of economic development in next 1 – 2 months, and not just opinions by economic agents based on current or past economic trajectories.

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