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Early warning indicator of economic vulnerability

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Author Info

  • Wong, Shirly Siew-Ling
  • Puah, Chin-Hong
  • Abu Mansor, Shazali
  • Liew, Venus Khim-Sen

Abstract

The initiative to capture the information content behind the rise and fall of the business cycle has popularized the study of leading indicators. Many of the foreign experiences shared by economically advanced countries reveal that the leading indicator approach works well as a short-term forecasting tool. Thus, exploring an indicator-based forecasting tool for business cycle analysis and economic risk monitoring would provide insight into the Malaysian economy as well as that of other emerging countries. By extending the ideology of indicator construction from the US National Bureau of Economic Research (NBER), the present study demonstrated the strong potential of the leading indicator approach to be a good gauge of the business cycle movement in addition to being a practical and functional early warning indicator for economic vulnerability prediction.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39944.

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Date of creation: 2012
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Handle: RePEc:pra:mprapa:39944

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Keywords: Business Cycle; Composite Leading Indicator; Early Warning Indicator;

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References

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  1. Michael Meow-Chung Yap, 2009. "Assessing Malaysia’s Business Cycle indicators," Development Research Unit Working Paper Series 04-09, Monash University, Department of Economics.
  2. Issler, João Victor & Notini, Hilton Hostalacio & Rodrigues, Claudia Fontoura, 2012. "Constructing Coincident and Leading Indices of Economic Activity for the Brazilian Economy," Economics Working Papers (Ensaios Economicos da EPGE) 730, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Konstantin A. Kholodilin & Boriss Siliverstovs, 2005. "On the Forecasting Properties of the Alternative Leading Indicators for the German GDP: Recent Evidence," Discussion Papers of DIW Berlin 522, DIW Berlin, German Institute for Economic Research.
  4. Greer, Mark, 2003. "Directional accuracy tests of long-term interest rate forecasts," International Journal of Forecasting, Elsevier, vol. 19(2), pages 291-298.
  5. Aslihan Atabek & Evren Erdogan Cosar & Saygin Sahin�Z, 2005. "A New Composite Leading Indicator for Turkish Economic Activity," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 41(1), pages 45-64, January.
  6. Everhart, Stephen S. & Duval-Hernandez, Robert, 2000. "Leading indicator project - Lithuania," Policy Research Working Paper Series 2365, The World Bank.
  7. Wolfgang Polasek, 2010. "Dating and Exploration of the Business Cycle in Iceland," Working Paper Series 13_10, The Rimini Centre for Economic Analysis.
  8. Samuelson, Paul A, 1976. "Optimality of Sluggish Predictors under Ergodic Probabilities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(1), pages 1-7, February.
  9. Neftici, Salih N., 1982. "Optimal prediction of cyclical downturns," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 225-241, November.
  10. Wesley C. Mitchell & Solomon Fabricant, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1.
  11. Stephen Everhart & Robert Duval-Hernandez, 2001. "Short Term Macro Monitoring: Leading Indicator Construction-Mexico," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0108, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  12. Stan du Plessis, 2006. "Business Cycles in Emerging market Economies: A New View of the Stylised Facts," Working Papers 02/2006, Stellenbosch University, Department of Economics.
  13. Diebold, Francis X & Rudebusch, Glenn D, 1989. "Scoring the Leading Indicators," The Journal of Business, University of Chicago Press, vol. 62(3), pages 369-91, July.
  14. Wong, Shirly Siew-Ling & Abu Mansor, Shazali & Puah, Chin-Hong & Liew, Venus Khim-Sen, 2012. "Forecasting malaysian business cycle movement: empirical evidence from composite leading indicator," MPRA Paper 36649, University Library of Munich, Germany.
  15. Geoffrey H. Moore & Victor Zarnowitz, 1986. "Appendix A The Development and Role of the National Bureau of Economic Research's Business Cycle Chronologies," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 735-780 National Bureau of Economic Research, Inc.
  16. Vincent, BODART & Konstantin A., KHOLODILIN & Fati, SHADMAN-MEHTA, 2003. "Dating and Forecasting the Belgian Business Cycle," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  17. Miroslav Klúcik & Ján Haluška, 2008. "Construction of composite leading indicator for the Slovak economy," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 55, pages 363-370, November.
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