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Early warning indicator of economic vulnerability

Author Info

Listed author(s):
  • Wong, Shirly Siew-Ling
  • Puah, Chin-Hong
  • Abu Mansor, Shazali
  • Liew, Venus Khim-Sen

Abstract

The initiative to capture the information content behind the rise and fall of the business cycle has popularized the study of leading indicators. Many of the foreign experiences shared by economically advanced countries reveal that the leading indicator approach works well as a short-term forecasting tool. Thus, exploring an indicator-based forecasting tool for business cycle analysis and economic risk monitoring would provide insight into the Malaysian economy as well as that of other emerging countries. By extending the ideology of indicator construction from the US National Bureau of Economic Research (NBER), the present study demonstrated the strong potential of the leading indicator approach to be a good gauge of the business cycle movement in addition to being a practical and functional early warning indicator for economic vulnerability prediction.

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File URL: https://mpra.ub.uni-muenchen.de/39944/1/MPRA_paper_39944.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39944.

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Date of creation: 2012
Handle: RePEc:pra:mprapa:39944
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Keywords: Business Cycle; Composite Leading Indicator; Early Warning Indicator;

Find related papers by JEL classification:

  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
  • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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  1. Kholodilin Konstantin Arkadievich & Siliverstovs Boriss, 2006. "On the Forecasting Properties of the Alternative Leading Indicators for the German GDP: Recent Evidence," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(3), pages 234-259, June.
  2. 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.
  3. Greer, Mark, 2003. "Directional accuracy tests of long-term interest rate forecasts," International Journal of Forecasting, Elsevier, vol. 19(2), pages 291-298.
  4. Stan du Plessis, 2006. "Business Cycles in Emerging market Economies: A New View of the Stylised Facts," Working Papers 02/2006, Stellenbosch University, Department of Economics.
  5. Geoffrey H. Moore & Victor Zarnowitz, 1986. "Appendix A: The Development and Role of the National Bureau of Economic Research's Business Cycle Chronologies," NBER Chapters,in: The American Business Cycle: Continuity and Change, pages 735-780 National Bureau of Economic Research, Inc.
  6. Diebold, Francis X & Rudebusch, Glenn D, 1989. "Scoring the Leading Indicators," The Journal of Business, University of Chicago Press, vol. 62(3), pages 369-391, July.
  7. João Victor Issler & Hilton Hostalacio Notini & Claudia Fontoura Rodrigues, 2013. "Constructing coincident and leading indices of economic activity for the Brazilian economy," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2012(2), pages 43-65.
  8. Samuelson, Paul A, 1976. "Optimality of Sluggish Predictors under Ergodic Probabilities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(1), pages 1-7, February.
  9. Wong, Shirly Siew-Ling & Abu Mansor, Shazali & Puah, Chin-Hong & Liew, Venus Khim-Sen, 2012. "Forecasting malaysian business cycle movement: empirical evidence from composite leading indicator," MPRA Paper 36649, University Library of Munich, Germany.
  10. Michael Meow-Chung Yap, 2009. "Assessing Malaysia’s Business Cycle indicators," Monash Economics Working Papers 04-09, Monash University, Department of Economics.
  11. Wesley Clair Mitchell & Arthur F. Burns, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1.
  12. Everhart, Stephen S. & Duval-Hernandez, Robert, 2000. "Leading indicator project - Lithuania," Policy Research Working Paper Series 2365, The World Bank.
  13. Miroslav Klúcik & Ján Haluška, 2008. "Construction of composite leading indicator for the Slovak economy," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 55, pages 363-370, November.
  14. Vincent, BODART & Konstantin A., KHOLODILIN & Fati, SHADMAN-MEHTA, 2003. "Dating and Forecasting the Belgian Business Cycle," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  15. Wolfgang Polasek, 2010. "Dating and Exploration of the Business Cycle in Iceland," Working Paper Series 13_10, The Rimini Centre for Economic Analysis.
  16. Stephen Everhart & Robert Duval-Hernandez, 2001. "Short Term Macro Monitoring: Leading Indicator Construction-Mexico," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0108, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  17. Neftici, Salih N., 1982. "Optimal prediction of cyclical downturns," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 225-241, November.
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