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Social Indicators Research

, Volume 143, Issue 1, pp 95–114 | Cite as

Economic Uncertainty: A Geometric Indicator of Discrepancy Among Experts’ Expectations

  • Oscar ClaveriaEmail author
  • Enric Monte
  • Salvador Torra
Article

Abstract

In this study we present a geometric approach to proxy economic uncertainty. We design a positional indicator of disagreement among survey-based agents’ expectations about the state of the economy. Previous dispersion-based uncertainty indicators derived from business and consumer surveys exclusively make use of the two extreme pieces of information: the percentage of respondents expecting a variable to rise and to fall. With the aim of also incorporating the information coming from the share of respondents expecting a variable to remain constant, we propose a geometrical framework and use a barycentric coordinate system to generate a measure of disagreement, referred to as a discrepancy indicator. We assess its performance both empirically and experimentally by comparing it to the standard deviation of the share of positive and negative responses. When applied in sixteen European countries, we find that both time-varying metrics co-evolve in most countries for expectations about the country’s overall economic situation in the present, but not in the future. Additionally, we obtain their simulated sampling distributions and we find that the proposed indicator gravitates uniformly towards the three vertices of the simplex representing the three answering categories, as opposed to the standard deviation, which tends to overestimate the level of uncertainty as a result of ignoring the no-change responses. Consequently, we find evidence that the information coming from agents expecting a variable to remain constant has an effect on the measurement of disagreement.

Keywords

Expectations Disagreement Economic tendency surveys Geometry Barycentric coordinate system Spatial vectors 

Notes

Acknowledgements

This research was supported by the projects ECO2016-75805-R and TEC2015-69266-P from the Spanish Ministry of Economy and Competitiveness. We would like to thank the Editor and two anonymous referees for their useful comments and suggestions We also wish to thank Anna Stangl and Johanna Garnitz at the Ifo Institute for Economic Research in Munich for providing us the data used in the study.

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Copyright information

© Springer Nature B.V. 2018

Authors and Affiliations

  1. 1.AQR-IREA, University of BarcelonaBarcelonaSpain
  2. 2.Department of Signal Theory and CommunicationsPolytechnic University of CatalunyaBarcelonaSpain
  3. 3.Riskcenter-IREA (Institute of Applied Economics Research), Department of Econometrics and StatisticsUniversity of BarcelonaBarcelonaSpain

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