The predictive power of the business and bank sentiment of firms: a high-dimensional granger causality approach

We study the predictive power of industry-specific economic sentiment indicators for future macro-economic developments. In addition to the sentiment of firms towards their own business situation, we study their sentiment with respect to the banking sector – their main credit providers. The use of industry-specific sentiment indicators results in a high-dimensional forecasting problem. To identify the most predictive industries, we present a bootstrap Granger Causality test based on the Adaptive Lasso. This test is more powerful than the standard Wald test in such high-dimensional settings. Forecast accuracy is improved by using only the most predictive industries rather than all industries.

Jaar van publicatie:2016

BOF-keylabel:ja

IOF-keylabel:ja

BOF-publication weight:6

CSS-citation score:1

Auteurs:International

Authors from:Higher Education

Toegankelijkheid:Closed