A Composite Leading Indicator of Tunisian Inflation
AbstractThis paper investigates the possibility of constructing a composite leading indicator (CLI) of Tunisian inflation. For doing so, partial information about future inflation rate provided by a number of basic series is analyzed first. Based on the correlation analysis, a few of these basic series are chosen for construction of composite indicator. Empirical results show that the deviation from long‐term trend of two monetary aggregates (M1 and M3), short‐term interest rate (TMM), real effective exchange rate and crude petroleum production, are important leading indicators for inflation rate in Tunisia. Accordingly, based on monthly data on these basic series, one composite indicator is constructed and its performance is assessed by using turning point analysis, granger causality tests, and impulse response functions. The results indicate that our composite indicator is useful in anticipating changes in inflation rates in Tunisia.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp980.
Date of creation: 01 Mar 2010
Date of revision:
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Tunisia; Inflation; Leading indicators; Composite index;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-14 (All new papers)
- NEP-ARA-2010-08-14 (MENA - Middle East & North Africa)
- NEP-CBA-2010-08-14 (Central Banking)
- NEP-MAC-2010-08-14 (Macroeconomics)
- NEP-MON-2010-08-14 (Monetary Economics)
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