Relationship analysis of CPI and PMI in the Eurozone and the United States
Remes, Jere (2024)
2024
Tietojohtamisen DI-ohjelma - Master's Programme in Information and Knowledge Management
Johtamisen ja talouden tiedekunta - Faculty of Management and Business
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Hyväksymispäivämäärä
2024-12-20
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tuni-2024121111010
https://urn.fi/URN:NBN:fi:tuni-2024121111010
Tiivistelmä
Both the CPI and the PMI are important economic indicators, influencing economies, businesses, financial markets and individual decision-making. By forecasting and monitoring these indicators, stakeholders can make more informed decisions.
The objective of this thesis was to study the relationship between the CPI and the PMI in the Eurozone and the US. The long-term relationship was analyzed with Johansen Co-integration, and the short-term dynamics were analyzed with VECM, IRF and FEVD. Model diagnostics were conducted to confirm the validity of the VECM. The data of the study covered monthly data on CPI and PMI values for the Eurozone and the US from November 2013 to August 2023.
The results of the study revealed a long-term relationship between the CPI and the PMI in both the Eurozone and the US. The short-term relationships revealed that inflation appears to affect business sentiment in both regions. The VECM results showed that in the Eurozone, CPI has a more long-term impact on PMI compared to quicker responses of PMI in the US. The IRFs highlighted the transitory effect of CPI on the PMI in both regions. The FEVD suggested that in both regions both the CPI and the PMI are driven by their own historical shocks, challenging the perception of a connection existing between these variables, and highlighting their complex interaction.
The objective of this thesis was to study the relationship between the CPI and the PMI in the Eurozone and the US. The long-term relationship was analyzed with Johansen Co-integration, and the short-term dynamics were analyzed with VECM, IRF and FEVD. Model diagnostics were conducted to confirm the validity of the VECM. The data of the study covered monthly data on CPI and PMI values for the Eurozone and the US from November 2013 to August 2023.
The results of the study revealed a long-term relationship between the CPI and the PMI in both the Eurozone and the US. The short-term relationships revealed that inflation appears to affect business sentiment in both regions. The VECM results showed that in the Eurozone, CPI has a more long-term impact on PMI compared to quicker responses of PMI in the US. The IRFs highlighted the transitory effect of CPI on the PMI in both regions. The FEVD suggested that in both regions both the CPI and the PMI are driven by their own historical shocks, challenging the perception of a connection existing between these variables, and highlighting their complex interaction.