MEASURING BUSINESS CYCLE FLUCTUATIONS: AN ALTERNATIVE PRECURSOR TO ECONOMIC CRISES

Shirly Wong (), Chin-Hong Puah, Shazali ABU Mansor () and Venus Liew

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, 2016, vol. 50, issue 4, 235-248

Abstract: This study constructs a factor-based model of business cycle identification for the Malaysian economy via the dynamic factor approach. Our central focus is to explore a factor-based business cycle indicator (BCI) that can serve as a good gauge for economic crises. The empirical finding is in harmony with the envisaged objective; the constructed BCI produces satisfactory identification of business cycle turning points and statistically outperforms the national-owned composite leading indicator (CLI) in terms of predictive accuracy and forecasting performance. Therefore, we reckon that the constructed BCI can serve to identify the business climate and foretell approaching economic crises in a timely manner.

Keywords: Business cycle indicator; dynamic factor model; turning points; forecasting; Malaysia (search for similar items in EconPapers)
JEL-codes: C38 C43 C61 E37 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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