On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables

Abstract

We analyse the effects of aggregating the level of disagreement in survey-based expectations. With this aim, we construct several indicators based on two metrics of disagreement: the standard deviation of the balance and a geometric measure of discrepancy. We use data from business and consumer surveys in eleven European countries and the Euro Area. We evaluate the dynamic response of economic growth to shocks in agents’ uncertainty gauged by the discrepancy measures in a bivariate vector autoregressive framework. We find that while the effect on economic activity to a shock in aggregate discrepancy is always negative for firms’ disagreement, the effect to consumers’ disagreement is positive in all countries except Italy. To shed some light regarding the effect of aggregating disagreement both across variables and economic agents on forecast accuracy, we also examine the predictive performance of the discrepancy indicators, using them to generate out-of-sample forecasts of economic growth. We do not find evidence that the aggregation of disagreement improves forecast accuracy. These findings are especially relevant when using cross-sectional dispersion of survey-based expectations of firms and households.

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Availability of Data and Material

The datasets used and/or analysed during the current study are: The Joint Harmonised EU Consumer Survey conducted by the European Commission, which can be freely downloaded at: https://ec.europa.eu/info/business-economy-euro/indicators-statistics/economic-databases/business-and-consumer-surveys_en. Gross Domestic Product provided by Eurostat at: https://ec.europa.eu/eurostat/web/national-accounts/data/main-tables.

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Correspondence to Oscar Claveria.

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Appendix

Appendix

Figure 6 contains the evolution of the disagreement indicators presented in Sect. 2 computed with the geometric indicator of discrepancy (G).

Fig. 6
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Evolution of disagreement indicators (2003:01–2020:08)

Table 5 presents the results of the estimation of the VAR models.

Table 5 Estimation of VAR models

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Claveria, O. On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables. J Bus Cycle Res (2020). https://doi.org/10.1007/s41549-020-00050-2

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Keywords

  • Uncertainty
  • Economic growth
  • Disagreement
  • Expectations
  • Firms
  • Households
  • Business and consumer surveys

JEL Classification

  • C32
  • E23
  • E27
  • E71