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A New Composite Leading Indicator for Turkish Economic Activity

Author

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  • ASLIHAN ATABEK
  • EVREN ERDOGAN COSAR
  • SAYGIN SAHINÖZ

Abstract

The aim of this paper is to construct a composite leading indicator (CLI) for Turkish economic activity that would crucially provide earlier signals of turning points between economic expansions and slowdowns. First, for this analysis, the index of industrial production is selected as an indicator for economic activity. Second, a group of variables that perform well both in forecasting and in tracking cyclical developments of economic activity is selected from a broad set of economic indicators related to industrial production. While constructing the CLI, a growth cycle approach is used. The resulting cyclical patterns of the series are obtained by eliminating seasonal, irregular, and trend components via TRAMO/SEATS programs and Hodrick-Prescott filter. The selection of the component series is based on theoretical economic significance and their leading performance at cyclical turning points. From the selected series, different CLIs are constructed, and that with the best performance is chosen as the CLI for Turkish economic activity.

Suggested Citation

  • Aslihan Atabek & Evren Erdogan Cosar & Saygin Sahinöz, 2005. "A New Composite Leading Indicator for Turkish Economic Activity," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 45-64, January.
  • Handle: RePEc:mes:emfitr:v:41:y:2005:i:1:p:45-64
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    References listed on IDEAS

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    Cited by:

    1. Burcu Gurcihan Yunculer & Gonul Sengul & Arzu Yavuz, 2014. "A Quest for Leading Indicators of the Turkish Unemployment Rate," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 14(1), pages 23-45.
    2. Shirly Siew-Ling WONG & Chin-Hong PUAH & Shazali ABU MANSOR & Venus Khim-Sen LIEW, 2016. "Measuring Business Cycle Fluctuations: An Alternative Precursor To Economic Crises," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(4), pages 235-248.
    3. Sumru Altug & Erhan Uluceviz, 2011. "Leading Indicators of Real Activity and Inflation for Turkey, 2001-2010," Koç University-TUSIAD Economic Research Forum Working Papers 1134, Koc University-TUSIAD Economic Research Forum.
    4. Wong, Shirly Siew-Ling & Puah, Chin-Hong & Abu Mansor, Shazali & Liew, Venus Khim-Sen, 2012. "Early warning indicator of economic vulnerability," MPRA Paper 39944, University Library of Munich, Germany.

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