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Topics. Composite Leading Indicators for Individual Countries-Evaluation of Indicators (Non-OECD)- Characteristics of leading indicators - Cyclical properties of CLIsGrowth Cycles and Reference Series-New and old Reference series for OECD Area and OECD Europe Area-New Area Aggrega
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1. Composite Leading Indicators and Growth Cycles inMajor OECD Non-Member Economies and Recently New OECD Member Countries Ronny Nilsson
Statistics Directorate
OECD
2. Topics Composite Leading Indicators for Individual Countries
- Evaluation of Indicators (Non-OECD)
- Characteristics of leading indicators
- Cyclical properties of CLIs
Growth Cycles and Reference Series
- New and old Reference series for OECD Area and OECD Europe Area
- New Area Aggregates
- Timing Relationship of Individual Countries with New Area Aggregates
Composite Leading Indicators for New Zone Aggregates
3. Evaluation of Indicators -Major OECD Non-Member Economies Methods used to evaluate Cyclical Performance
Turning Point Analysis
- Mean/median lead, standard deviation at turning points,
extra or missing cycles
Cross-correlation – Average lead at max correlation
Cross Spectral Analysis
- Coherence (explained variance) and Mean Delay
Dynamic Factor Analysis
- Common component variance/indicator variance,
- Cross-correlation between common components
- Cyclical timing classification (mean delay)
4. Criteria used for Timing Classification ofindicators by country and subject area Cross Spectral Analysis Mean delay
leading = value > 1
NBER Analysis Median lead
leading = > 2 periods
Dynamic Factor Analysis Common component
cross-correlation leading = coef. > 0.50 and positive lag
5. Cyclical Evaluation Results by Country
6. Cyclical Evaluation Results by Subject
7. Selection of Potential Component Series for Construction of Composite Indicators Criteria
Cyclical behaviour at turning points
- median lead
- standard deviation at turning points
- number of extra and missing turning points
Practical issues
- timeliness of the latest data available (t+2)
- frequency (delay for timely data, if quarterly frequency)
- smoothness (irregular series (MCD 5 or 6) will imply revisions due to smoothing)
8. Characteristics of Leading Indicators General problems
Data Availability restricted to few subject areas and indicators (see table below)
Short time period of available data for many indicators
back to 1990/96 in all countries except Brazil (79), South Africa (75), New Zealand (80) and China (83)
Frequency of many good indicators is quarterly, this concerns most business and consumer tendency series
(South Africa and New Zealand)
Timeliness a particular problem for series with quarterly frequency (Brazil, India, South Africa and New Zealand)
9. Characteristics of CLIsMajor OECD Non-member Economies
10. Characteristics of CLIsRecently New OECD Member Countries
11. Characteristics of CLIs for New Countries Compared to CLIs for Major OECD Countries General fit (peak-correlation) with reference series is rather good for most countries – for Eastern European countries a weaker correlation is noted
Median and peak-correlation leads show inconsistent results for several countries (Indonesia, Russia, New Zealand)
Variability of lead at all TPs as measured by standard variation is high in several countries (China, Indonesia, Russia, South Africa, New Zealand and Hungary)
12. Composite Leading Indicator - Brazil
13. Composite Leading Indicator - China
14. Composite Leading Indicator - India
15. Composite Leading Indicator- Russia
16. Composite Leading Indicator – South Africa
17. Composite Leading Indicator – Korea
18. Composite Leading Indicator – Hungary
19. Composite Leading Indicator – Poland
20. Conclusions CLI evaluation results encouraging – but they are based on a very short time period with only 2 or 3 growth cycles registered in all countries (except Brazil)
CLI components restricted to a few subject areas
- financial indicators (> 50% in India and Indonesia)
- tendency surveys (> 50% in Russia and South Africa)
Timeliness and revisions is a problem for the calculation of regular monthly CLIs with quarterly components from business or consumer tendency surveys
Coverage of component series in OECD databases is a condition for the calculation of regular monthly CLIs –
- High share of selected component for several countries
require special data collection arrangements
21. New and Old Reference Series for OECD Area and OECD Europe Area
22. New Regional or Area Aggregates OECD Eastern Europe
- share is 7.5 % of OECD Europe Area
- country weights (GDP at PPP) in %, Czech R. 21.1, Hungary 15.8, Poland 52.6, Slovak R. 10.5
Major Five Asian Economies
- share is close to 35% of World Proxy
- country weights, China 44.4, India 20.9,
Indonesia 4.9, Japan 23.6, Korea 6.2
World Proxy (OECD + major 6 OECD non-members)
- covers 83.1 % of World GDP (OECD 57.1)
- country weights, Brazil 3.2, China 15.3. India 7.2, Indonesia 1.7, Russia 3.0, South Africa 1.1,
United States 25.0, Japan 8.1 ……………………
23. Timing Relationship of Individual Countries with New Area Aggregates OECD Eastern Europe
- Hungary and Poland coincident and well correlated
- Czech and Slovak better against Europe as a whole
- Russia shows leading tendency, but weak correlation
- no major difference against Europe and Euro Area
Asia Major 5 Area
- China, India and Japan coincident and well correlated
- Korea coincident, but weak correlation
- Australia, New Zealand and Indonesia show weak or not significant correlation
24. Timing Relationship of Growth Cycles in Individual Countries with New Area Aggregates World Proxy (OECD Area + Major 6 OECD Non members)
- China and India show leading tendency against World Proxy and median leads of 5-3 months against OECD Area
- Korea and New Zealand show leading tendency against World Proxy and OECD Area, but weak correspondence with OECD Area
- Brazil, Russia and South Africa show lagging tendency and Russia and South Africa also shows weak correspondence against World Proxy and OECD area
- Eastern European countries show lagging tendency and extremely weak correspondence against World Proxy and OECD Area with exception of Poland
25. Hungary, Poland and OECD Eastern Europe
26. Czech R., Slovak R., Russia andOECD Eastern Europe
27. OECD Europe, Euro Area and OECD Eastern Europe
28. China, India andAsia Major 5 Economies
29. Japan, Korea and Asia Major 5 Economies
30. Australia, New Zealand, Indonesia andAsia Major 5 Economies
31. Timing Relationship of Growth Cycles in New and Established Area Aggregates against OECD Area and World Proxy Euro Area/OECD Europe/OECD Eastern Europe
- All European aggregates show a tendency to lag
against both OECD Area and World Proxy
NAFTA (North American Free Trade Area)
- shows a coincident behaviour against both OECD
Area and World Proxy
Asia Major 5 Area
- shows a leading tendency against both OECD
Area and World Proxy with clear median lead of 4
months against the OECD Area
32. OECD Area, OECD Europe Area, NAFTA and Asia Major 5 Economies
33. World Proxy, OECD Area, Brazil and South Africa
34. CLIs for New Area AggregatesCyclical Characteristics 1995-2005 World Proxy
- CLI shows a median lead of 2 months and a peak- correlation of 0.92 at a lead of 3 months
Asia Major 5 Area
- CLI shows a median lead of 3 months and a peak- correlation of 0.85 at a lead of 3 months
OECD Eastern Europe
- CLI shows a median lead of 4 months, but a peak- correlation of only 0.39 at a lead of 7 months
35. World ProxyOECD area + Major 6 NMEs
36. Asia Major 5 Economies
37. OECD Eastern Europe
38. Publication and References http://www.oecd.org/std/cli
Nilsson Ronny and Olivier Brunet, 2006. Composite Leading Indicators for Major OECD Non-Member Economies: Brazil, China, India, Indonesia, Russian Federation and South Africa, OECD Statistics Working Paper STD/DOC(2006)1, available at http://www.olis.oecd.org/olis/2006doc.nsf/LinkTo/std-doc(2006)1
OECD, 2006. Composite Leading Indicators for Major OECD Non-Member Economies and Recently New OECD Member Countries, Unclassified Document available at http://www.oecd.org/document/60/0,2340,en_2649_34349_36674300_1_1_1_1,00.html