Business indicators

Is an economic recession predictable?

In recent decades, major imbalances have occurred in the development of the economy. Examples include the occurrence of bubbles in the housing market, increasing prices on the commodities market, and shocks that move stock prices. From the perspective of a stable prosperity development, major drawbacks adhere to these imbalances: bubbles lead to wrong investment decisions and as a result of crises and recessions, households are faced with unemployment and the related income effects and speculations. Accurately predicting and, if possible, better management of economic instability, is therefore a subject of great social importance.

The project Business Cycle – Business Indicators, conducted by Erasmus Quantitative Intelligence B.V. (EQI), has the ambition to enable to predict, respond to and to manage cyclical phenomena. Cyclical phenomena such as recessions, expansion, slight growth, and bubbles are caused by internal as well as external factors. Internal factors stem from human behaviour. Consider as an example the development of housing prices; regular price increases occur until the bubble bursts and a period of sustained price erosion occurs. External factors include natural disasters, terrorist attacks and changes in tax laws.

In this project indicators will be prospected that can help us to recognise, for example, a future economic crisis or to make our economy more resilient to external influences. In addition, questions from business and families are answered.

Econometric Institute Current Indicator of the Economy

Economy this week?

What is the state of the economy this week? What is the expectation for the next week? Everybody can look outside to see what the current weather situation is, but with the economy that is more difficult. Even the CBS (Statistics Netherlands) can only provide an indication of the economy of “today” 45 days later. The indicators developed in this project provide real-time insights about the current state of the economy.

Invest now?

Is this a good time to buy a house? Or to invest in technology or in R&D? Targeted business indicators at the sector level give answers to questions that have implications on pretty much everyone.

Recruit more personnel?

Is it wise to hire more temporary personnel in the coming weeks? The recruitment of extra personnel is not without risk. Business indicators help to make such difficult decisions.

On the verge of a break?

How durable is the current trend? Will the economy continue to grow or are we on the verge of a break? It is good to identify economic shocks on time in order to limit the damage. The business indicators developed within this project mainly aim to identify overheated markets and to timely predict the moment when the bubble will burst.

To answer these questions, the project Business Cycle – Business Indicators has been set up. The project aims at developing real-time indicators that on the one hand can timely predict the overheating of certain market sectors, and on the other hand can indicate when a promising period of balanced growth is imminent.

In the future, these indicators will be made available to a wide audience through the internet and television. This rapid information disclosure makes it easier for decision-makers to take decisions, whether it is about buying a home, whether or not to invest, or policy-making.

These indicators are developed and studied by the econometricians of EQI from the Erasmus University. The program “Business Indicators” is headed by prof.  dr.  Philip  Hans Franses. He is the chairman of the group of supporting professors: prof.  dr.  Dick van Dijk, prof.  dr.  Dennis Fok and prof.  dr.  Bert de Groot. Project members are dr. Kristiaan Glorie and dr. Koen Bel.

Presentations of the research results can be consulted following the links below. For more information and the final reports, please contact mr Kristiaan Glorie: glorie@ese.eur.nl.

 

Prof. dr. Philip Hans Franses Professor of applied econometrics & marketing research, Erasmus School of Economics