Business expectations and the economic cycle in Ecuador 2007-2018
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Abstract
The expectations that economic agents make about macroeconomic variables can be an important anticipatory mechanism of ups and downs in the economic cycle. The research question is: Is there then a causal relationship between business expectations and the economic cycle that allows predicting the behavior and the relationship between the two? Thus, it is sought to investigate whether the economic cycle is a determinant in the business expectation formation or viceversa, if expectations are a cycle determinant. To answer this question, verify the Granger causality test, then an Autoregressive Model and another of Autoregressive Vectors will be applied. It is concluded that for the Ecuadorian economy the economic cycle depends on business expectations because for each percentage point that increases business confidence in the previous quarter the production of the real period increases by 0.17%, therefore, expectations act as a mechanism for anticipate ups and downs cycle.
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