Composite leading indicators of underlying inflation for seven EU countries
✍ Scribed by J. A. Bikker; N. O. Kennedy
- Publisher
- John Wiley and Sons
- Year
- 1999
- Tongue
- English
- Weight
- 678 KB
- Volume
- 18
- Category
- Article
- ISSN
- 0277-6693
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✦ Synopsis
This paper presents short-and long-term composite leading indicators (CLIs) of underlying in¯ation 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 in¯ation, series containing information on in¯ation 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 in¯ation over the past raises hope that this forecast instrument can be useful in predicting future price movements.