A generalised dynamic factor model for the Belgian economy - Useful business cycle indicators and GDP growth forecasts

This paper aims to extract the common variation in a data set of 509 conjunctural series as an indication of the Belgian business cycle. The data set contains information on business and consumer surveys of Belgium and its neighbouring countries, macroeconomic variables and some worldwide watched indicators such as the ISM and the OECD confidence indicators. The statistical framework used is the One-sided Generalised Dynamic Factor Model developed by Forni, Hallin, Lippi and Reichlin (2005). The model splits the series in a common component, driven by the business cycle, and an idiosyncratic component. Well-known indicators such as the EC economic sentiment indicator for Belgium and the NBB overall synthetic curve contain a high amount of business cycle information. Furthermore, the richness of the model allows to determine the cyclical properties of the series and to forecast GDP growth all within the same unified setting. We classify the common component of the variables into leading, lagging and coincident with respect to the common component of quarter-on-quarter GDP growth. 22% of the variables are found to be leading. Amongst the most leading variables we find asset prices and international confidence indicators such as the ISM and some OECD indicators. In general, national business confidence surveys are found to coincide with Belgian GDP, while they lead euro area GDP and its confidence indicators. Consumer confidence seems to lag. Although the model captures the dynamic common variation contained in the data set, forecasts based on that information are insufficient to deliver a good proxy for GDP growth as a result of a nonnegligible idiosyncratic part in GDP's variance. Lastly, we explore the dependence of the model's results on the data set and show through a data reduction process that the idiosyncratic part of GDP's quarter-on-quarter growth can be dramatically reduced. However, this does not improve the forecasts.Dynamic factor model, business cycle, leading indicators, forecasting, data reduction.

Do survey indicators let us see the business cycle ? A frequency decomposition

This paper uses a frequency domain approach to gain insight into the correlation between survey indicators and year-on-year GDP growth. Using the Baxter-King filter, we split up each series into three components: a short-term, a business cycle (oscillations between 18 and 96 months) and a long-term component. We then calculate how much of the variation of the survey series and GDP growth can be ascribed to these different components. Finally, we use this information together with an analysis of the correlation between survey indicators and year-on-year GDP growth at the different frequencies to explain their overall correlation. We show that survey indicators, similar to year-on-year GDP growth, do not perfectly reflect business cycle movements but contain cycles of other frequencies. Long-term cycles, in particular, are a nontrivial part of the series' variance. Furthermore, there exist some clear relations between the weight of these cycles in the survey indicators and their correlation with GDP growth. In general, the larger the business cycle component, the larger the correlation, while the opposite is true for the short-term component. The evidence for the long-term component is mixed: although a long-term component seems necessary as the correlation at this frequency is the highest, strong or weak long-term components are typically idiosyncratic, dragging down the overall correlation between the indicator and year-on-year GDP growth. The paper applies this methodology to the euro area countries (EC survey indicators) and to Belgium separately (NBB business survey indicators). The results are highly comparableBaxter-King, spectral analysis, survey indicators, correlation

The National Bank of Belgium, Research Department’s new business survey indicator

The business survey indicator is one of the most valuable statistics that the Bank publishes every month. Its reputation is due to the reliability it has demonstrated over several decades in reflecting the pattern of economic activity in the country and in the euro area every month. The indicator is compiled on the basis of the responses to the monthly business survey that the Bank has arranged with enterprises in Belgium since 1954. Almost twenty years after the last methodological revision of the indicator in 1990, the Bank decided that it was now desirable to review its method of calculation again. This article presents the key characteristics of the business survey indicator, its practical applications and the new method of calculation applied since April 2009. This methodological revision gradually became necessary owing to the extension of the survey in 1994 to business-related services, the results of which were not included in the general business survey indicator until this methodological change. The old business survey indicator had also exhibited some undesirable short-term fluctuations. The methodological changes have been kept to a minimum and only concern the calculation of the synthetic curves, with an amended selection of questions that are included in the synthetic curves for each industry and by incorporating the business-related services curve into the overall synthetic business indicator. These changes aim to strengthen the correlation between the indicator and GDP growth, to reduce the undesirable short-term volatility and to maintain its early response.business cycle, business survey, leading indicator, correlation, GDP

Getting by in Europe's urban labour markets: Senegambian migrants' strategies for survival, documentation and mobility

This book examines two major social changes experienced by European cities in the last two decades: post-industrial economic restructuring and new immigration flows. The link between both has been extensively discussed throughout a variety of theoretical approaches and in numerous descriptive contributions. Adding to those studies, this research focuses on three elements of migratory experience that have been relatively neglected thus far: a dynamic view of changes over time, the influence of national welfare and legislation frameworks, and the importance of support mechanisms outside the labour market. The material underpinning the arguments is the qualitative life-course analysis of 81 in-depth interviews with Senegambian migrants living in Antwerp and Barcelona.Deze dissertatie onderzoekt twee belangrijke sociale veranderingen die Europese steden in de laatste twee decennia hebben ondergaan: postindustriële economische herstructurering en nieuwe immigratiestromen. Inge van Nieuwenhuyze bespreekt drie nieuwe elementen van de migratieproblematiek, die tot dusver relatief onderbelicht zijn geweest: een dynamisch overzicht van de veranderingen, de invloed van de nationale welzijns- en wetgevingskaders en het belang van de opvangmogelijkheden buiten de arbeidsmarkt. Het materiaal is verkregen uit 81 diepte-interviews met Senegalezen en Gambianen woonachtig in Antwerpen en Barcelona

The Belgian deposit guarantee scheme in a European perspective

During the recent financial crisis, the deposit guarantee scheme in Belgium – as in other European countries – played a role in preventing bank runs and restoring confidence : to that end, the intervention ceilings were raised substantially and the scope of the scheme was extended to include certain life insurance policies. Finally, the expansion of the system’s coverage had to be financed by a sharp increase in the contributions from financial institutions. First of all, that measure had a positive impact on the budget ; secondly, increased contributions may also boost the credibility of the deposit guarantee system. A recent European initiative proposes further ambitious reforms. Besides a better consumer protection, the European deposit guarantee schemes would be largely harmonised, thus also promoting European financial integration. Risk-weighted financing of the schemes should counteract moral hazard, benefiting financial stability. However, this proposal has yet to be approved by the European Parliament and the Council. Its impact ought to be assessed in the light of the broader package of measures aimed at making the financial system more resilient, such as the new prudential supervision structure, the Basel III proposal for stricter capital and liquidity requirements, and the possible new levies on the financial sector.deposit assurance, financial institutions, financial crisis, moral hazard

The impact of low interest rates on household financial behaviour

For the greater part of 2010, short-term and long-term interest rates in Belgium were at exceptionally low levels. Nominal interest rates reached historic lows ; in real terms, only the low point of 1974 remained unequalled. The yield curve was in turn relatively steep. In the first place, the question of whether these low interest rates have an impact on the overall financial transactions of households is examined. During the recent period, interest rates in real terms have only had a limited influence on the overall volume of savings of Belgian households. It seems that the increased savings behaviour of households and the associated accumulation of net financial assets during the period 2009-2010 can largely be attributed to economic uncertainty due to the financial crisis. But it can certainly be assumed that interest rates play some part in the selection of savings and investment vehicles by households. This is the case when they have to choose between short-term and long-term vehicles : long-term investments benefit from a clear preference in periods of high long-term interest rates or when the interest rate cycle has moved into a downward phase. During the few periods with a flat or inverted yield curve, private individuals reduce their short-term deposits since they then possibly expect a fall in long-term yields. It is primarily in the choices between short-term savings vehicles that interest rates have the greatest influence, as witnessed by the persistent switching between term and regulated savings deposits, where the recent fall in short-term interest rates worked strongly in favour of the latter vehicle. The build-up of claims on technical reserves of life insurance companies and pension funds is being stimulated by the current level of interest rates, since certain existing contracts offer a guaranteed return that is higher than the current market rates. Lastly, interest rates have some influence on the commitments entered into by households, and in the first place mortgage loans. It is primarily the number of mortgages that strongly grows in the case of low interest rates. Alongside this, low interest rates may prompt price rises on the housing market with a resulting higher level of recourse to mortgage lending. But lending does not entirely follow the trend in housing prices, partly due to a more restrictive lending policy on the part of the banks.saving, interest rates, credit, portfolio choice

Getting by in Europe's Urban Labour Markets

This book examines two major social changes experienced by European cities in the last two decades: post-industrial economic restructuring and new immigration flows. The link between both has been extensively discussed throughout a variety of theoretical approaches and in numerous descriptive contributions. Adding to those studies, this research focuses on three elements of migratory experience that have been relatively neglected thus far: a dynamic view of changes over time, the influence of national welfare and legislation frameworks, and the importance of support mechanisms outside the labour market. The material underpinning the arguments is the qualitative life-course analysis of 81 in-depth interviews with Senegambian migrants living in Antwerp and Barcelona

A paleolimnological reconstruction of mid and late holocene climate change in South Georgia

South Georgia is located at the barrier between Antarctica and the mid-latitudes which makes it a key location to determine the main drivers of past and present-day climate variability and to assess whether the climate in the South Atlantic was synchronous with Antarctica or South America. Here we performed a sedimentological, high resolution (ITRAX) geochemical, and fossil diatom and pigment analysis of a 5.41 m long, ca. 8000 cal yr BP, sediment core from Fan Lake, Annenkov Island, South Georgia (54°29’0’’S, 37°5’0’’W) in an attempt to separate the influence of Holocene palaeoclimatic variability from changes in catchment stability and glacier activity. While radiocarbon ages of events in the top 250 cm (c. 4 ka) of this core appear to be broadly in line with some other studies on South Georgia, the chronology of the lower half still poses several questions. The main lithological division in the profile is marked by the establishment of finely laminated sedimentation at c. 250 cm (4000 yrs BP) and is also picked out by the diatom and pigment analysis. This change is characterized by a reduction to low stable magnetic susceptibility values and a step-change increase in organic matter, and is most likely related to deglaciation of the lake catchment during the ‘Mid Holocene Hypsithermal’. Although the diatom composition is dominated by a single species (i.e., Cyclotella stelligera), relatively minor, but sometimes significant, fluctuations in other diatom species occur in the top 250 cm (mid-late Holocene). Interestingly, the most remarkable change in the diatom record occurs at c. 100 cm (1000 cal yr BP) and coincides with an increase in general lake productivity. We link these changes to increased catchment disturbance at c. 1000 cal yr BP, which is possibly associated with deglaciation following one of four relatively minor ‘post-cooling events’ during the late Holocene