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The Forecasting Performance of Composite Leading Indicators: Does Globalisation Matter?

Author

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  • Ferdinand Fichtner
  • Rasmus Rüffer
  • Bernd Schnatz

Abstract

Using OECD Composite Leading Indicators (CLI), we assess empirically whether the ability of the country-specific CLIs to predict economic activity has diminished in recent years, e.g. due to rapid advances in globalisation. Overall, we find evidence that the CLI encompasses useful information for forecasting industrial production, particularly over horizons of four to eight months ahead. The evidence is particularly strong when taking cointegration relationships into account. At the same time, we find indications that the forecast accuracy has declined over time for several countries. Augmenting the country-specific CLI with a leading indicator of the external environment and employing forecast combination techniques improves the forecast performance for several economies. Over time, the increasing importance of international dependencies is documented by relative performance gains of the extended model for selected countries.

Suggested Citation

  • Ferdinand Fichtner & Rasmus Rüffer & Bernd Schnatz, 2011. "The Forecasting Performance of Composite Leading Indicators: Does Globalisation Matter?," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2011(1), pages 55-72.
  • Handle: RePEc:oec:stdkab:5kgg5k4zb49w
    DOI: 10.1787/jbcma-2011-5kgg5k4zb49w
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    Cited by:

    1. Johanna Garnitz & Robert Lehmann & Klaus Wohlrabe, 2019. "Forecasting GDP all over the world using leading indicators based on comprehensive survey data," CESifo Working Paper Series 7691, CESifo Group Munich.
    2. Garnitz, Johanna & Lehmann, Robert & Wohlrabe, Klaus, 2017. "Forecasting GDP all over the World: Evidence from Comprehensive Survey Data," MPRA Paper 81772, University Library of Munich, Germany.

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