A Review on the Leading Indicator Approach towards Economic Forecasting

Economic cycle is defined as the fluctuation of an economy via expansion and contraction periods, influenced by varies kinds of macroeconomic indicators. The repeatable movement of economic indicators enables the accurate detection of these cycles with a forecasting approach that aims to improve economic development, especially by specific industries. Thus, economists and researchers have focused on the usefulness of the composite leading indicator in economic forecasting. It is regarded as a good illustration of an economic cycle or trend. This is due to its ease of use during the interpretation process, as several indicators can be aggregated and explained at once. This may provide useful insights for policy planning, risk monitoring and community development using the information gained from macroeconomic aggregates.