This paper proposes a framework to construct indexes of activity which links two strands of the index literature – the traditional business cycle analysis and the latent variable approach. To illustrate the method, we apply the framework to Australian regional data, namely to two resource-rich...

Using a quarterly consumer expectations survey, we propose two novel measures of consumer optimism, ex ante optimism and ex post optimism. We demonstrate empirically that excessive optimism about future family finances impacts the real economy. The excessive optimism (ex ante optimism) compels...

Using a quarterly consumer expectations survey, we propose two novel measures of the optimism bias in consumers, ex ante optimism and ex post optimism. We demonstrate empirically that excessive optimism about future family finances impacts the real economy. Ex ante , excessive optimism compels...