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Slowdown or Recession? Forecasts Based on Composite Leading Indicator

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Author Info

  • Miroslav Klúcik

    ()
    (Institute of Informatics and Statistics (INFOSTAT))

  • Jana Juriová

    (Institute of Informatics and Statistics (INFOSTAT))

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    Abstract

    The economy of Slovakia experienced a turning point in the 1st half of 2008 and entered a phase of decline. The negative impacts of the global economic crisis became evident in the 2nd half of 2008 and led into a recession in the 1st quarter of 2009. The composite leading indicator was originally intended for forecasting of business cycle turning points between the decline and growth phases. The aim of this paper is to transform the qualitative information from composite leading indicator into quantitative forecast and verify whether the beginning of recession in Slovakia could have been identified in advance. The ARIMAX and error correction models are used for the composite reference series and GDP forecasts respectively. The final result shows that the composite leading indicator is useful not only for identifying turning points, but also for the prediction of recession phase.

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    File URL: http://www.cejeme.pl/publishedarticles/2010-46-03-634244031661250000-6967.pdf
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    Bibliographic Info

    Article provided by CEJEME in its journal Central European Journal of Economic Modelling and Econometrics.

    Volume (Year): 2 (2010)
    Issue (Month): 1 (January)
    Pages: 17-36

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    Handle: RePEc:psc:journl:v:1:y:2010:i:4:p:17-36

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    Web page: http://cejeme.org/

    Related research

    Keywords: Global economic crisis; recession; composite leading indicator; ARIMAX model; error correction model;

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    1. Pami Dua & Anirvan Banerji, 2006. "Business Cycles in India," Working papers 146, Centre for Development Economics, Delhi School of Economics.
    2. Victor Zarnowitz & Ataman Ozyildirim, 2001. "Time Series Decomposition and Measurement of Business Cycles, Trends and Growth Cycles," Economics Program Working Papers 01-03, The Conference Board, Economics Program.
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