trading ecomomics

trading ecomomics

The Impact of Trading Economics

1. Introduction

Since January 1st, 2012, the world has – up to now – had broad access to the financial database of Trading Economics (TE) in the field of economics. That global and free access has attracted the attention of many researchers and academics to apply the database to different topics of economic research. Despite the large number of papers, however, there is an issue that appears to have been overlooked. The latter is the main concern addressed in this paper. More specifically, we intend to capture the impact of the database through web mining searches on respondents’ expectations. The aim is to provide an exploratory analysis for the 15 European Union (EU) countries, using the Trading Economics platform as a proxy of agents’ attention.

In the first part, we provide a brief description of both Trading Economics and the recent literature investigating the impact of Google Trends on economic agents’ expectations.

In recent years, the attention of the economics community has been directed towards two highly emerging topics: the database of Google Trends and the financial database of Trading Economics. Such interest has led to a wide body of literature investigating the use of these databases in different areas of economic research, as well as in corporate finance. Despite the great variety of topics addressed, however, an issue that appears to have been overlooked is the impact of those databases on respondents’ and firms’ expectations. The latter is the main concern addressed in this paper.

2. Understanding Trading Economics

The system has loads of features that can help retrieve data on an indicator level, such as by frequency (monthly, quarterly, annually, etc.), with optional transformation methods (like finding percentage change), and each indicator can be constructed into a custom data series and affected directly. This system means that even though it was never designed for massive consumption, and the website was initially designed with human interaction as the only consumable output method, it can still potentially serve millions of API requests a day. This comes without accounting for the bulk download option, which would allow clients the ability to download thousands of series at once. The fact remains though that machines can make decisions far quicker than we can, so write requests are rather quick. Of course, that is if they are as fine-tuned as they can be, which in many given situations, clients might request data in ways that the system does not handle. Given that Trading Economics must serve not only client requests but also internal initiatives like feeding the chart system that provides the balancing layer for their webpage, the data team must regularly work on optimizations.

Trading Economics (TE) is a data vendor providing millions of macroeconomic time series to mainly financial institutions and technology companies. The data spans over 20,000 indicators for 200 countries and 7,000 different sources, with updates often as frequent as every 3 hours. These time series can be consumed in a myriad of applications. At a high level, they can be used for both financial and economic analysis.

3. The Benefits of Trading Economics

The advantages that come from trading economics are so many. Following the theory of the English economist David Ricardo, a main advantage of trading is specialization. For example, using economies of scale firms can increase their production keeping the same costs. That is a main advantage that comes from specialization. Countries have different costs and efficiencies in producing goods and services. Much easier than they did before, countries are now able to match goods produced in the national territories at the same prices. This happens because there are no barriers to trade and firms’ logistics are so evolved. Not at all. Countries are increasing their sales so new markets are opening up, including those for the goods that represent the real specialization in countries. Also, the fact this world growth is across-the-board and various are the markets that drive it.

The effects of trade on economic and financial growth have been explored since the times of Adam Smith. Whenever growth is stimulated, then for sure the welfare of a state increases. Overall, opening a domestic economy seems to be better than keeping one exclusively based on internal resources. This section wants to focus more on the outcomes of international trade, which are strongly related to the EU Integration, which can be considered as the prototype of a system based on open markets and exchange of productive inputs. Therefore, the Italian economy has to meet the EU standards if the country wants to be able to be competitive.

4. The Challenges of Trading Economics

Our group has analyzed the impact of Trading Economics on the quality of a business cycle descriptor such as the Credit and Trust Indices and performed an empirical examination of the relation between a suitably defined Credit and Trust Index and some quantities of trading physics. This motivates the questions about the relation between the structural modifications of the market by traders, which operate a self-preserving activity, and the structure of the economy. It is well clear, on the noisy trader scenario, that appeals for even more fine-tuned control strategies supporting the evanescence of the noise on which only large investment and uncertain market setting. These strategies cannot be guaranteed on other bases; in fact, on historical grounds, public policies that aim at enhancing the level of public information might become unstable due to the collective behavior of trading at variance with its macroscopic origins.

An intensive use of trading physics imposes a serious challenge in order to gather the necessary statistical demand for the economic analysis. A variety of tests based on these physics are performed in order to investigate the relationship between these quantities and the predictions of fundamental economic models. The behavior of long trading and intertrade durations is determined by the collective action of a large number of traders and depends on the parameters of the considered stock. Interesting features appear. Beyond qualitative differences among stocks, several interesting dynamic effects are present. Their relevance and universality for many financial observables suggest very strongly that econophysics is not a mere metaphor, perhaps providing physics with the most immediate transfer of language and concepts in a different context, almost in a century when British climatology became entering meteorology through Richardson’s work.

5. Conclusion

Trading Economics models forecast equilibrium GDP, which is the potential output that the economy tends to reach in the long run. Although those are frequent pieces of noisier reality, the forecasts, that signal could be relevant in the case of financial markets. Depending on the values of currency and inflation, whether they are above or below the prefix equilibrium value, it could affect the future policy of the country. Frequent knowledge on when and how many basis points the deviation will happen would depend on that and on which variables are used. Expectations could adjust more gradually or rapidly to the effects of monetary policy. However, tradingeconomics.com was only able to predict the sign of the deviation and was not able to anticipate how many basis points the level of the currency or inflation should be in order to realign with the equilibrium path.

This chapter analyzed the impact of Trading Economics on expectations about the economy. As anticipated, the availability of data and a user-friendly interface are important drivers of the use of the tool. The real-time databases constitute another success of Trading Economics, but some areas could be improved, such as the construction of indices. This is not a trivial task because it involves different sources and weights from time to time. However, as other websites do not provide broad and real-time series, and some indices are available on the firm’s website, they are able to create a good feature. In terms of the real-time availability of the main series, tradingeconomics.com is a good tool, as are the counterparts offered by central banks such as the New York Fed or Banxico Institute. Only a few months separate the release on those frameworks and the official publication, despite limitations of employing Trading Economics as a good forecasting tool, market attention to those variables has risen over the years. In this sense, the recent increased interest in information about Latam should attract the attention of the provider.