A real time leading economic indicator based on text mining for the Spanish economy. Fractional cointegration VAR and Continuous Wavelet Transform analysis

Carlos Poza and Manuel Monge

International Economics, 2020, vol. 163, issue C, 163-175

Abstract: The main aim of this paper is to build a Real Time Leading Economic Indicator (RT-LEI) that improves Composite Leading Indicators (CLI)’s performance to anticipate GDP trends and turning points for the Spanish economy. The indicator has been constructed using a Factor Analysis and is composed of 21 variables concerning motor vehicle activity, financial activity, real estate activity, economic sentiment, and industrial sector. The data sources used are Google Trends and Thomson Reuters Eikon-Datastream. This work contributes to the literature, studying the dynamics of GDP, CLI and RT-LEI using Fractional Cointegration VAR (FCVAR model) and Continuous Wavelet Transform (CWT) for its resolution. The results show that the model does not present mean reversion and it is expected the RT-LEI reveals a bear trend in the next two years, alike IMF and Consensus FUNCAS′ forecasts. The reasons are mostly associated with escalating global protectionism, uncertainty related to Catalonia and faster monetary policy normalization.

Keywords: Leading economic indicators; Business cycle; Google trends; Fractional cointegration VAR; Wavelet analysis (search for similar items in EconPapers)
JEL-codes: E32 E37 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2110701719302008
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:163:y:2020:i:c:p:163-175

DOI: 10.1016/j.inteco.2020.02.002

Access Statistics for this article

International Economics is currently edited by Valerie Mignon and Marcelo Olarreaga

More articles in International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().