Kiel Working Papers, Kiel Institute for World Economics
No 1659:
Identification of a Core-Periphery Structure Among Participants of a Business Climate Survey
Thomas Lux and Ulrich Stolzenburg
Abstract: Processes of social opinion formation might be dominated
by a set of highly influential agents acting as ‘opinion leaders’. Here we
explore whether such a perspective could shed light on the dynamics of a
well known economic sentiment index. To this end, we hypothesize that the
respondents of the survey under investigation form a core-periphery
network, and we identify those agents that define the core (in a discrete
setting) or the proximity of each agent to the core (in a continuous
setting). As it turns out, there is significant correlation between the so
identified cores of different survey questions. Both the discrete and the
continuous cores allow an almost perfect replication of the original series
with a reduced data set of core members or weighted entries according to
core proximity. Using a monthly time series on industrial production in
Germany, we also compared experts’ predictions with the real economic
development. The core members identified in the discrete setting showed
significantly better prediction capabilities than those agents assigned to
the periphery of the network
Keywords: Business climate, network topology, economic expectations; (follow links to similar papers)
JEL-Codes: C42,; C83,; D85; (follow links to similar papers)
23 pages, December 2010
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