The Korean Journal of Applied Statistics (응용통계연구)

The Korean Statistical Society (한국통계학회)
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Construction of an Economic Sentiment Indicator for the Korean Economy

  • Received : 20110500
  • Accepted : 20110800
  • Published : 2011.10.31
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Abstract

An Economic Sentiment Indicator(ESI) is a composite indicator of business survey indices(BSI) and consumer survey indices(CSI). The ESI designed to reflect economic agents' (this includes producers and consumers) overall perceptions of economic activity in a one-dimensional index. The European Commission has published an ESI since 1985. This paper demonstrates the construction of an ESI for the Korean economy. The BSI and CSI components (having a high correlation and a leading feature with respect to GDP) are selected to construct the ESI and they are aggregated using a weighted average and then scaled to have a long-term average of 100 and a standard deviation of 10. Thus values greater than 100 indicate an above-average economic sentiment and vice versa. The newly constructed Korean ESI that extends to January 2003 shows a good tracking performance of GDP and adequately reflects the overall perception of economic activity.

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References

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  2. Information Variables for the Predictability of Future Changes in Real Growth vol.26, pp.2, 2013, https://doi.org/10.5351/KJAS.2013.26.2.253
  3. A study on the improvement of the economic sentiment index for the Korean economy vol.26, pp.6, 2015, https://doi.org/10.7465/jkdi.2015.26.6.1335