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Inspecting the Relationship Between Business Confidence and Industrial Production: Evidence on Italian Survey Data

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  • G. Bruno

    (ISTAT)

  • L. Crosilla

    (ISTAT)

  • P. Margani

    (ISTAT)

Abstract

The aim of this paper is to investigate the relationship between the manufacturing confidence indicator (CI) and the industrial production index (IPI) as well as to address the effects of the “Great Recession” on this relation. Some stylized facts about CI are firstly presented and the stability of the relationship in the framework of a linear model is subsequently explored. In addition, the findings are tested to be robust with respect to a “sample selection” effect in survey data and also to the hypothesis that they may suggest a change in the long-term trends in the industrial activity. The empirical evidence shows that: (1) the change in the relationship may be due to some cyclical reasons, rather than structural ones; (2) the performance of CI is not affected by the different permanence of firms in the panel; (3) agents are likely to adjust their production plans during the financial crisis, considering a new lower benchmark for their industrial activity in the long term. In particular, as the capacity utilization that managers consider as “ideal/sufficient” is proven to be changed over time, this finding may be consistent with the presence of non-linearities in the relation between CI and IPI.

Suggested Citation

  • G. Bruno & L. Crosilla & P. Margani, 2019. "Inspecting the Relationship Between Business Confidence and Industrial Production: Evidence on Italian Survey Data," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 15(1), pages 1-24, April.
    • Handle: RePEc:spr:jbuscr:v:15:y:2019:i:1:d:10.1007_s41549-018-00033-4
    DOI: 10.1007/s41549-018-00033-4
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    3. Juan G Brida & Bibiana Lanzilotta & Lucia I Rosich, 2021. "On the empirical relations between producers expectations and economic growth," Economics Bulletin, AccessEcon, vol. 41(3), pages 1970-1982.
    4. Sudeshna Ghosh, 2021. "Business Confidence and Business Tourism in Japan," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 1-23, February.
    5. Daniel Roash & Tanya Suhoy, 2019. "Sentiment Indicators Based on a Short Business Tendency Survey," Bank of Israel Working Papers 2019.11, Bank of Israel.
    6. Christian Gayer & Bertrand Marc, 2018. "A ‘New Modesty’? Level Shifts in Survey Data and the Decreasing Trend of ‘Normal’ Growth," European Economy - Discussion Papers 083, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Petar Sorić & Mirjana Čižmešija & Marina Matošec, 2020. "EU Consumer Confidence and the New Modesty Hypothesis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 152(3), pages 899-921, December.
    8. Maria Rita Ippoliti & Fabiana Sartor & Luigi Martone, 2021. "Trade surveys: qualitative and quantitative indicators," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 75(4), pages 75-85, October-D.

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    More about this item

    Keywords

    Survey data; Industrial production index; Non-linear relationship; Capacity utilization;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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