Construction of the Arkansas Tech Business Index

Document Type

Article

Publication Date

Fall 2014

Department

School of Business

Abstract

The Arkansas Tech Business Index (ATBI) is an indicator of economic conditions across the state of Arkansas. It measures economic performance in 17 cities at a monthly frequency. The index is composed of four sector sub-indices measuring labor markets, housing markets, construction activity, and retail sales. To calculate the index we gather data from secondary and primary sources, at the city or county level, on a monthly frequency. The data, and thus the index, begins in January 2009. We use regression analysis to isolate the movement in a variable independent from population, state level economic activity, and the other indicators. The four sub-indices are weighted in order ensure that each sub-index has a similar impact on the final index, up-weighting low variation components and down-weighting high variation components. The index is centered at 100, with that being a neutral reading. Index values above 100 represent higher than average economic activity, while values below 100 show the opposite. The reference is the contemporaneous state economy, not just the total of all 17 cities. The index illuminates movement over time, intra-city differences, and across-sector disparities. Each month, as new data is received we recalibrate the underlying economic model and then recalculate the full index – 2009 to the present. Thus one should not expect the current release of last month’s index value to match the index value for last month that was released last month. The advantage of such a system is that the index model is always up-to-date and the index time series is always internally consistent.

Volume

13

Issue

1

ISSN

24760226

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