Ivana Lolić

A critical re-examination of the Carlson–Parkin method

ABSTRACT The euro area has been experiencing a long period of inflation well below the targeted 2%. This has once again brought the problem of quantifying inflation expectations into the scientific focus. Within the framework of the Carlson–Parkin (CP) method, previous research has mostly focused on altering the probability distributions. Analysing as much as 2688 versions of the CP method, we prove that the distribution choice provides only minor improvements in the forecasting accuracy. On the other hand, the method assumptions (unbiased expectations and the number of survey response categories) play the pivotal role. We make an attempt to provide an assumptions-free quantification method by recognizing the fact that agents perceive ‘moderate’ inflation through the inflation targeting policy.

The interrelationship between media reports and the recession in Croatia

Abstract This paper builds upon the Economist’s R-word (recession) index by forming a Croatian version of a media news-based economic uncertainty measure. Using the web archives of the four major Croatian news portals (Index.hr, Jutarnji list, Večernji list and 24 sata), an extensive database of as much as 531107 news articles is formed. The R-word index is obtained by calculating the monthly share of recession-related articles. This way Croatia is placed among the few rare world countries which have their own version of this index. It is found that the index is a leading indicator of economic activity in Croatia, preceding GDP growth rates by two months. Using rolling window correlations, the authors also prove that economic agents react to uncertainty shocks in the most intensive manner precisely at the onset of an economic crisis, while the correlation decreases in periods of more stable economic growth rates.

Personal Finances Vs. The Overall Economic Conditions : What Drives The New EU Member States’ Stock Markets?

Abstract This paper analyses the leading characteristics of the Consumer Confidence Index (CCI) with respect to stock market returns for 11 New EU Member States. It proposes novel CCI weights by minimizing mean squared errors from regression forecasting equations, using CCI lags as regressors. With regards to the obtained “optimal” weights, the examined countries are grouped into micro‑ and macro‑oriented clusters. A strong shift is found in the weights due to the recent recession. The micro aspects (reflecting the wealth effect) severely lose their importance in the crisis, while the consumers’ macroeconomic sentiments grow in significance and constitute a separate transmission channel.