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Leading Indicators of Real Activity and Inflation for Turkey, 2001-2010

Author

Listed:
  • Sumru Altug

    () (Koç University and CEPR)

  • Erhan Uluceviz

    (Istanbul Bilgi University)

Abstract

This paper develops a set of leading indicators of industrial production growth and consumer price inflation for the period 2001-2010. The choice of indicators is based on pseudo out-of-sample forecasting exercise implemented by Stock and Watson (2003), amongst others. We find that asset prices that reflect expectational factors or interest rates that capture the costs of borrowing for the Turkish economy tend to have the greatest predictive power for future real activity and inflation. Our findings provide evidence on the factors determining real activity and inflation in a period of disinflation and normalization for the Turkish economy.

Suggested Citation

  • 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.
  • Handle: RePEc:koc:wpaper:1134
    as

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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1134.pdf
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    References listed on IDEAS

    as
    1. Clark, Todd E. & McCracken, Michael W., 2001. "Tests of equal forecast accuracy and encompassing for nested models," Journal of Econometrics, Elsevier, pages 85-110.
    2. de Carvalho Filho Irineu E, 2011. "28 Months Later: How Inflation Targeters Outperformed Their Peers in the Great Recession," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-46.
    3. 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.
    4. Sumru Altug & Bilin Neyapti & Mustafa Emin, 2012. "Institutions and Business Cycles," International Finance, Wiley Blackwell, pages 347-366.
    5. Altug, Sumru G. & Bildirici, Melike, 2010. "Business Cycles around the Globe: A Regime-switching Approach," CEPR Discussion Papers 7968, C.E.P.R. Discussion Papers.
    6. Altinay, Galip & Karagol, Erdal, 2005. "Electricity consumption and economic growth: Evidence from Turkey," Energy Economics, Elsevier, pages 849-856.
    7. Oliveira, Fernando Nascimento & Petrassi, Myrian Beatriz Silva, 2014. "Is Inflation Persistence Over?," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 68(3), September.
    8. Wesley Clair Mitchell & Arthur F. Burns, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1.
    9. Jeffrey A. Frankel & George Saravelos, 2010. "Are Leading Indicators of Financial Crises Useful for Assessing Country Vulnerability? Evidence from the 2008-09 Global Crisis," NBER Working Papers 16047, National Bureau of Economic Research, Inc.
    10. repec:sbe:breart:v:21:y:2001:i:1:a:3191 is not listed on IDEAS
    11. Altug, Sumru & Ashley, Richard A. & Patterson, Douglas M., 1999. "Are Technology Shocks Nonlinear?," Macroeconomic Dynamics, Cambridge University Press, pages 506-533.
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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.

    More about this item

    Keywords

    Real activity; inflation; leading indicators; out-of-sample forecasting; combination forecasts; inflation targeting; Turkey;

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • 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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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