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A quasi real-time leading indicator for the EU industrial production

Listed author(s):
  • Donadelli, Michael
  • Paradiso, Antonio
  • Riedel, Max

We build a quasi real-time leading indicator (LI) for the EU industrial production (IP). Differently from previous studies, the technique developed in this paper gives rise to an ex-ante LI that is immune to "overlapping information drawbacks". In addition, the set of variables composing the LI relies on a two-steps dynamic and systematic procedure. This ensures that the choice of the variables is not driven by subjective views. Our LI anticipates swings (including the 2007-2008 crisis) in the EU industrial production - on average - by 2 to 3 months. If revised, its predictive power largely improves. Via a couple of standard empirical exercises we show that the proposed LI (i) forecasts crises' phases better than the ex-post LIs proposed by the OECD and the Conference Board and (ii) captures the interest rate policy pattern rather well.

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File URL: https://www.econstor.eu/bitstream/10419/146790/1/869511858.pdf
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Paper provided by Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt in its series SAFE Working Paper Series with number 118 [rev.].

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Date of creation: 2016
Handle: RePEc:zbw:safewp:118r
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