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Composite leading indicators of underlying inflation for seven EU countries
Author(s) -
Bikker J. A.,
Kennedy N. O.
Publication year - 1999
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/(sici)1099-131x(199907)18:4<225::aid-for722>3.0.co;2-p
Subject(s) - inflation (cosmology) , econometrics , point (geometry) , economics , coherence (philosophical gambling strategy) , turning point , macroeconomics , term (time) , inflation rate , monetary policy , statistics , period (music) , mathematics , physics , geometry , quantum mechanics , theoretical physics , acoustics
This paper presents short‐ and long‐term composite leading indicators (CLIs) of underlying inflation for seven EU countries, namely Belgium, Germany, France, Italy, the Netherlands, Sweden and the UK. CLI and CPI reference series are calculated in terms of both growth rates and in deviations from its trend. The composite leading indicators are based on leading basic series, such as sources of inflation, series containing information on inflation expectations and prices of intermediate goods and services. Neftci's decision rule approach has been applied to transfer movements in the CLIs into a measure of the probability of a cyclical turning point, which enables the screening out of false turning point predictions. Finally, CLIs have been used to analyse the international coherence of price cycles. The forecast performance of CLIs of inflation over the past raises hope that this forecast instrument can be useful in predicting future price movements. Copyright © 1999 John Wiley & Sons, Ltd.