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A Leading Indicator for the Dutch Economy – Methodological and Empirical Revision of the CPB System

Author

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  • Henk C. Kranendonk
  • Jan Bonenkamp
  • Johan P. Verbruggen

Abstract

Since 1990 the Netherlands Bureau for Economic Policy Analysis (CPB) uses a leading indicator in preparing short-term forecasts for the Dutch economy. This paper describes some recent methodological innovations as well as the current structure and empirical results of the revised CPB leading indicator. Special attention is paid to the role and significance of IFO data. The structure of the CPB leading indicator is tailored to its use as a supplement to model-based projections, and thus has a unique character in several respects. The system of the CPB leading indicator is composed of ten separate composite indicators, seven for expenditure categories (‘demand’) and three for the main production sectors (‘supply’). This system approach has important advantages over the usual structure, in which the basis series are directly linked to a single reference series. The revised system, which uses 25 different basic series, performs quite well in describing the economic cycle of GDP, in indicating the upturns and downturns, and in telling the story behind the business cycle.

Suggested Citation

  • Henk C. Kranendonk & Jan Bonenkamp & Johan P. Verbruggen, 2004. "A Leading Indicator for the Dutch Economy – Methodological and Empirical Revision of the CPB System," CESifo Working Paper Series 1200, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1200
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1200.pdf
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    References listed on IDEAS

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    1. Zarnowitz, Victor & Ozyildirim, Ataman, 2006. "Time series decomposition and measurement of business cycles, trends and growth cycles," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1717-1739, October.
    2. Agresti, Anna Maria & Mojon, Benoît, 2001. "Some stylised facts on the euro area business cycle," Working Paper Series 0095, European Central Bank.
    3. Uhlig, H.F.H.V.S. & Ravn, M., 1997. "On Adjusting the H-P Filter for the Frequency of Observations," Discussion Paper 1997-50, Tilburg University, Center for Economic Research.
    4. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    5. Jagjit S. Chadha & Charles Nolan, 2002. "A Long View of the UK Business Cycle," National Institute Economic Review, National Institute of Economic and Social Research, vol. 182(1), pages 72-89, October.
    6. Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, May.
    7. A.H.J. den Reijer, 2002. "International Business Cycle Indicators, Measurement and Forecasting," WO Research Memoranda (discontinued) 689, Netherlands Central Bank, Research Department.
    8. McGuckin, Robert H. & Ozyildirim, Ataman & Zarnowitz, Victor, 2007. "A More Timely and Useful Index of Leading Indicators," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 110-120, January.
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    Cited by:

    1. Mazhar Y. Mughal & Junaid Ahmed, 2014. "Remittances and Business Cycles: Comparison of South Asian Countries," International Economic Journal, Taylor & Francis Journals, vol. 28(4), pages 513-541, December.
    2. repec:prg:jnlpol:v:2017:y:2017:i:5:id:1163:p:583-600 is not listed on IDEAS

    More about this item

    Keywords

    leading indicator; short-term forecasts;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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