Measuring and Predicting Export Activity: An application on the Region of West Sweden

Abstract

In Sweden, export accounts for approximately 50 percent of the GDP and is a good indicator of the economic situation. This thesis develops an export index on quarterly basis to measure and predict the business cycle. The export index is built as a composite diffusion index. We propose a diffusion index including five categories and show that it is more informative than a diffusion index with three categories. The export index uses the opinions and expectations from firms in the region of West Sweden in 2013. This region has the largest export and was the region most affected by the recent financial crisis. The focus lies on firms from three well established clusters in the region: automotive, life science and textile. The estimated export index shows that 56.34 percent of the firms have a positive view on the current state, where life science is the cluster most positive. We also evaluate the determinants of positive export expectations using a discrete choice export policy function from a dynamic model. The findings show that previous quarter result, share capital and productivity have a positive impact on the expectations.