Why Use a Diffusion Index?

Santiago Pinto () and Sonya Ravindranath Waddell

Richmond Fed Economic Brief, 2022, vol. 22, issue 22

Abstract: Diffusion indexes are a useful way to summarize economic information from surveys because they are easy to understand and correlate well with economic activity over time. To use diffusion indexes most effectively as a measure of change, however, it is important that the extensive margin of the indicator in question explains more of the change in that indicator than the intensive margin. This article, and the papers described in it, can also be used to develop a confidence interval around any diffusion index.

Keywords: surveys; diffusion index; statistics (search for similar items in EconPapers)
Date: 2022
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