engleski

Economic Sentiment and Business Cycles: Spillover Methodology Approach

This paper is one of the newest attempts to observe and explain the relationship between the Economic Sentiment Indicator (ESI) and GDP growth. A new approach uses the Diebold and Yilmaz (2012, 2009) spillover methodology by combining the feedback relationship and the time-varying (dynamic) aspect of the same relationship. The empirical analysis is based on quarterly data over different periods in European Union (EU) (as a whole) and in ten Central and Eastern European (CEE) countries. The main results indicate that the spillovers of shocks between ESI and GDP growth are time- varying for all of the observed countries, with increasing values of total spillovers in the last recession and afterward. The direction and strength of spillover effects between the economic sentiment and GDP growth are different for the analyzed CEE countries. The results are robust with respect to changing the rolling window length, additional Granger causality testing and rolling correlation coefficients.

Spillover Index ; Economic Sentiment ; Rolling Granger Causality ; Business and Consumer Survey ; Recession

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