leading and lagging business cycle indicators
DESCRIPTION
original research paper on business cycleTRANSCRIPT
Palac, SilviaJaba, ElisabetaAlexandru Ioan Cuza University of Iasi, Faculty of Economics and Business Administration Iasi [email protected]@uaic.ro
Leading and lagging indicators of the economic crisis
Key words:business cycle, unemployment, gold price, Markov modelsJEL Classification: E24, E32, F44
The issues of business cycles assessment and most of all forecasting turning points represent crucial components in the game of crisis anticipation. The aim of this study is to statistically evaluate the predictive power of several macro economic variables in estimating economic changes and to classify them into either leading or lagging indicators. The importance thereof resides in the fact that, while the leading indicators are useful in anticipating downturns, a change within the structure or the dynamics of the lagging indicators could signal the beginning of an economic upswing. The detection of the turning points in the macroeconomic series, focusing exclusively on the US and the Euro Area, is performed by employing Markov chains switching models and the taxonomy of the indicators is awarded accordingly. Results show that the price of gold is a leading indicator, while unemployment is a lagging indicator of the crisis. Further research will include both an enlarged sample of variables and a wider array of countries in order to validate the results.