On the predictive content of production surveys: A pan-European study

For over 40 years, Business Tendency Surveys have been collected in multiple member states of the European Union. Previous research has studied the predictive content of the expectation variables included in those surveys through bivariate, within-country, Granger-causality tests. These tests have resulted in mixed conclusions. We extend previous research in various ways, as we (i) explicitly allow for cross-country influences, and (ii) do so using both bivariate and multivariate Granger-causality tests. Specifically, the multivariate El Himdi-Roy (HR) test is adapted to jointly test the forecasting value of multiple production expectation series, to assess whether part of this joint effect is indeed due to cross-country influences, and to determine which countries' expectation series have the most “clout” in predicting the production levels in the other member countries, or have the highest receptivity, in that their production levels are Granger caused by the other countries' expectations.