engleski

Can confidence indicators forecast the probability of expansion in Croatia?

The aim of this paper is to investigate how reliable are the Confidence Indicators in forecasting the probability of expansion. We consider three Croatian Business Survey indicators: the Industrial Confidence Indicator (ICI), Construction Confidence Indicator (BCI) and Retail Trade Confidence Indicator (RTCI). The quarterly data, used in the research, covered the period 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 periods of recession in the Croatian economy. Then, various nonlinear probit models were estimated. The models differ with respect to the regressors (confidence indicators) and in their time lags. The positive signs of estimated parameters suggest that the probability of the 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.

confidence Indicators ; expansion ; business survey ; probit models

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