Abstract
This paper focuses on the small local economic system of Varese. After analysing the actual economic tendencies of Varese on the basis of survey data, the features and the timing of its business cycle are investigated making a comparison towards business cycles in Lombardy and Italy. Industrial production, orders, sales and employment in Varese are showed to be lagging indicators of corresponding regional and national variables. The size of the lag is about one or two quarters. On the contrary the behaviour of inventories in Varese sistematically anticipates the regional one with a one quarter gap. The latter result is showed to be a plausible rationale for the former one. Finally, we build an econometric model based on Bayesian techniques in order to produce forecasts on some local economic indicators; it is the first econometric model for provincial forecasting in Italy. The model shows a higher forecasting performance to respect to other forecasting tools (business perspectives or leading indicators). The obtained forecasts for the period 1998Q2, 1998Q3 seem to describe a quite fast qrowth of the Varese economy.