Acta academica karviniensia 2020, 20(1):47-57 | DOI: 10.25142/aak.2020.004

ADJUSTING OF THE WEIGHTING SCHEME USING PENALTY METHODS IN THE BUSINESS AND CONSUMER SURVEYS

Veronika Ptáčková, Jiří Novák, Lubomír Štěpánek

Prague University of Economics and Business, Faculty of Informatics and Statistics

The Business and Consumer Survey is a commonly used and easy-to-follow tool for describing the current and near-future situation in the national economy. A lot of countries use leading indicators for economic predictions. The computations of the indicators are generally based on weighting schemes considering the importance of each survey questions groups. The European Commission harmonizes the weighting schemes for those calculations.In this article, we adjust the weighting scheme of the Economic Sentiment Indicator as the main result of the Business and Consumer Survey and design a new weighting structure of the calculation.  To find a new weighting scheme, we use a combination of a penalty method which measures L3-based-norm distance between all original weights and the proposed ones, adapting the weight system to the Czech economic data.  Applying the penalty functions is a method of respecting the original, empirically estimated weights used for the indicator's calculations on a long-term basis. The modified weighting scheme for the Economic Sentiment Indicator construction is supposed to ensure better predictions and, eventually, provide early warnings about any unexpected changes in the business cycle in the national economy.

Keywords: business and consumer survey, optimization, prediction ability, weighting scheme.

JEL classification: C10, C22

Received: October 2, 2020; Revised: December 4, 2020; Accepted: December 16, 2020; Published: December 17, 2020  Show citation