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Early warning indicator of economic vulnerability

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  • 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. 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.
  2. 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.
  3. Wesley C. Mitchell & Solomon Fabricant, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1, July.
  4. Neftici, Salih N., 1982. "Optimal prediction of cyclical downturns," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 4(1), pages 225-241, November.
  5. 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.
  6. Wolfgang Polasek, 2010. "Dating and Exploration of the Business Cycle in Iceland," Working Paper Series, The Rimini Centre for Economic Analysis 13_10, The Rimini Centre for Economic Analysis.
  7. Everhart, Stephen S. & Duval-Hernandez, Robert, 2000. "Leading indicator project - Lithuania," Policy Research Working Paper Series 2365, The World Bank.
  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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(1), pages 1-7, February.
  9. Diebold, Francis X & Rudebusch, Glenn D, 1989. "Scoring the Leading Indicators," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 62(3), pages 369-91, July.
  10. 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., M.E. Sharpe, Inc., vol. 41(1), pages 45-64, January.
  11. Michael Meow-Chung Yap, 2009. "Assessing Malaysia’s Business Cycle indicators," Development Research Unit Working Paper Series, Monash University, Department of Economics 04-09, Monash University, Department of Economics.
  12. 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, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0108, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  13. 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), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2003018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  14. João Victor Issler & Hilton Hostalacio Notini & Claudia Fontoura Rodrigues, 2012. "Constructing coincident and leading indices of economic activity for the Brazilian economy," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing,CIRET, OECD Publishing,CIRET, vol. 2012(2), pages 43-65.
  15. 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.
  16. Greer, Mark, 2003. "Directional accuracy tests of long-term interest rate forecasts," International Journal of Forecasting, Elsevier, Elsevier, vol. 19(2), pages 291-298.
  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, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 55, pages 363-370, November.
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