Introducing the Euro Area‐wide Leading Indicator (ALI): Real‐Time Signals of Turning Points in the Growth Cycle from 2007 to 2011 | Zendy

Bondt Gabe J. | Zendy; Hahn Elke | Zendy

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Introducing the Euro Area‐wide Leading Indicator (ALI): Real‐Time Signals of Turning Points in the Growth Cycle from 2007 to 2011

Author(s) -

Bondt Gabe J.,

Hahn Elke

Publication year - 2014

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/for.2273

Subject(s) - hodrick–prescott filter , turning point , business cycle , real gross domestic product , economics , econometrics , macroeconomics , physics , period (music) , acoustics

This paper introduces a new monthly euro Area‐wide Leading Indicator (ALI) for the euro area growth cycle which is composed of nine leading series and derived from a one‐sided bandpass filter. The main findings are that (i) the GDP growth cycle in the euro area can be well tracked, in a timely manner and at monthly frequency, by a reference growth cycle indicator (GCI) derived from industrial production excluding construction, (ii) the ALI reliably leads turning points in the GCI by 5 months and (iii) longer leading components of the ALI are good predictors of the GCI up to 9 months ahead. A real‐time case study on the ALI's capabilities for signalling turning points in the euro area growth cycle from 2007 to 2011 confirms these findings. Copyright © 2013 John Wiley & Sons, Ltd.

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