BUSINESS SURVEY LIQUIDITY MEASURE AS A LEADING INDICATOR OF CROATIAN INDUSTRIAL PRODUCTION

Business survey liquidity measure is one of the modifications of the uniform EU business survey methodology applied in Croatia. Consequent liquidity problem have been, since socialist times, one of the major problem for Croatia's business. The problem rapidly increased between 1995 and 2000 and now it again represents the main difficulty for the Croatian economy. In order to improve the forecasting properties of business survey liquidity measure, some econometric models ware applied. Based on the regression analysis we concluded that the changes in the liquidity variable can predict the direction of changes in industrial production with one quarter lead. The results also show that liquidity can be a proxy of the Industrial Confidence Indicator in the observed period. The empirical analysis was performed using quarterly data covering the period from the first quarter 2005 to the fourth quarter 2011. The data sources were Privredni vjesnik (a business magazine in Croatia) and the Croatian Bureau of Statistics.