Investigation of the relationship between the dynamics of GDP and economic sentiment index

Abstract

The paper develops and presents an appropriate model toolkit that allows assessing the relationship between the calculated indices of economic sentiment and confidence for the main types of economic activity. The aim of the study is to experimentally substantiate the relevance of data on the opinions of technological economic agents and assess the value of this information for the statistical description and analysis of macroeconomic trends, including economic cycles and unforeseen and prolonged crises. The main hypothesis about the cyclical sensitivity of composite indices, in particular the index of economic sentiment in relation to the dynamics of the physical volume of GDP, is tested. The authors calculate a composite indicator of aggregate economic sentiment and, based on a consistent analysis of the relationship between the index of physical volume of GDP and the indicator of economic sentiment, identify aggregate empirical patterns and features of the cyclical development of technological enterprises. Accordingly, the turning points of the business cycle are discussed and the leading nature of the proposed index of economic sentiment is affirmed. The importance of the composite indicators in the economic analysis of entrepreneurial behavior in the implementation of technological innovations is shown. The nature of the calculated Economic Sentiment Index was established, and its predictive capabilities for monthly and annual real GDP growth rates using autoregression and error correction models were investigated. The stages of calculating and setting indices with the application of the DEMETRA+ statistical package were implemented.