Assessing the Short-term Forecasting Power of Confidence Indices

Euler Mello and Francisco Rodrigues Figueiredo

No 371, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper assesses the predictive power of the main confidence índices available in Brazil to forecast economic activity. More specifically, we consider a set of economic activity variables and, for each of those, compare the predictive power of a univariate autoregressive model to that of a similar model that includes confidence index. Preliminary results using the Diebold Mariano test suggest that the Industry Confidence Index (ICI) provides relevant information, for both present and the near future, on some economic activity variables of interest to the economic agents.

Date: 2014-12
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