ALICE: Composite leading indicators for euro area inflation cycles

Gabe de Bondt, Elke Hahn and Zivile Zekaite

International Journal of Forecasting, 2021, vol. 37, issue 2, 687-707

Abstract: This paper develops Area-wide Leading Inflation CyclE (ALICE) indicators with the aim to provide early signals for turning points in the euro area headline and core inflation cycles. The headline (core) ALICE leads the reference cycle by three (four) months and the lead times extend to five (nine) months based on longer-leading series. Both ALICE indicators signalled turning points in the inflation cycles ex post and also performed well in a simulated real-time exercise. Moreover, in particular the headline ALICE also appeared to be useful for quantitative forecasting of the direction and level of inflation.

Keywords: Euro area inflation; Trend-cycle decomposition; Leading indicators; (Turning point) forecasts; Real-time analysis (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:37:y:2021:i:2:p:687-707

DOI: 10.1016/j.ijforecast.2020.09.001

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