USES OF BUSINESS AND CONSUMER OPINION SURVEY DATA, IMPLICATIONS FOR DATA PRODUCERS Giuseppe Parigi Bank of Italy, Economic Research Department

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USES OF BUSINESS AND CONSUMER OPINION SURVEY
DATA, IMPLICATIONS FOR DATA PRODUCERS Giuseppe
Parigi Bank of Italy, Economic Research
Department
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The art and science of short-term analysis of
high frequency economic data is extremely
important to economic policy decision makers,
such as central bankers.
Good diagnosis helps in making predictions
Katona (1957)
Among short-term indicators, survey data play a
prominent role
Nowadays there is an increasing demand of high
quality survey data
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SURVEY DATA might be represented as containing
three types of information (see Fuhrer, 1988)

• Information on current developments
• Forward-looking information
• Animal spirits information

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Information on current developments
Katona (1957) Expectations intentions as well
as other notions about the future are current
data which help to understand what is going on at
the time when expectations are held.
TIMELINESS
Survey data are available soon after the end of
the reference period (generally, the month) and
are not revised
Bridge models Early estimate of data released
with delay
Coincident indicators NBER and Factor models
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Bridge Models
Need timelier information about National accounts
BRIDGE MODELS
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Bridge Models matching variables and indicators
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Coincident indicator Eurocoin
150 series
40 series
160 series
130 series
80 series
40 series
200 series
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Forward-looking and animal spirit
information
Events which are difficult to quantify (tax
changes)
Expectations with self-fulfilling properties
Survey data Forecasting power
Turning points detection Estimates of the
probability of being in a recession/expansion
Leading Indicators Anticipate the evolution of
the cycle
Theoretical and Empirical Models Interpretations
of survey data what is this thing called
confidence? The problem of sometime too vague
verbal questions
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Survey data and Economic analysis
Although some consensus emerged in the literature
that SD could play a role, this appears to be ad
hoc. A convincing representation of SD is needed

• SD as an alias of macroeconomic variables?
• SD as a proxy of non-linearities (shocks)?
• SD as a proxy of unobserved variables?
• but their informative content is still a mystery

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Survey data and Economic analysis
EXPECTATIONS
Scepticism of economists to the use of survey
data one should believe only what people do and
not what people say.
Revealed preference analysis
Economists attempt to infer expectations by
combining data on realized experience (choice
data) with assumptions about the process of
expectation formation.
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Survey data and Economic analysis
The prevailing practice has been to assume that
agents have expectations that are objectively
correct (i.e. rational).
But lack of empirical evidence on the validity of
the expectations assumptions has led to a crisis
of credibility.
Survey data is a possible solution
The data I have in mind are self-reports of
expectations elicited in the form called for by
modern economic theory that is subjective
probabilities (Mansky, 2004)
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Survey data
Probabilistic questions

• Juster (1966) showed that elicited purchase
  probabilities are better predictors of subsequent
  behaviour
• Vague concepts like future economic conditions
  may be avoided with questions about personal
  facts
• Harmonization of survey across countries is more
  likely to be complete when based on numeric
  response scales
• Numeric probability scales allow the
  comparability of responses among different
  people, across situations and over time

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Survey data
Probabilistic questions Examples

• The Health and Retirement Study in the USA (subj.
  prob. of living 75/85, job loss etc.)
• The Bank of Italy Survey on Household Income and
  Wealth and The Dutch VSB-Panel Survey (subj.
  prob. of one year-ahead growth rates in income)
• The Bank of Italy Survey on Business Investment
  (one of the few examples of probabilistic
  questions to firms)
• The Michigan Survey of Consumers

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Survey data Further improvements
Survey should follow the evolution of people
behaviour

• Developments of financial markets
• Aging populations
• Reforms of the welfare

Imply new forms of uncertainty
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Survey data Further improvements
Survey data should be released in a more detailed
way

• on a geographical, sectoral, dimensional basis
  (but also new classifications as technologically
  advanced v. traditional sectors)
• by income, age, employment classes (better match
  with macroeconomic variables)