A New Monthly Indicator of Global Real Economic Activity

Francesco Ravazzolo and Joaquin Vespignani

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: In modelling macroeconomic time series, often a monthly indicator of global real economic activity is used. We propose a new indicator, named World steel production, and compare it to other existing indicators, precisely the Kilian’s index of global real economic activity and the index of OECD World industrial production. We develop an econometric approach based on desirable econometric properties in relation to the quarterly measure of World or global gross domestic product to evaluate and to choose across different alternatives. The method is designed to evaluate short-term, long-term and predictability properties of the indicators. World steel production is proven to be the best monthly indicator of global economic activity in terms of our econometric properties. Kilian’s index of global real economic activity also accurately predicts World GDP growth rates. When extending the analysis to an out-of-sample exercise, both Kilian’s index of global real economic activity and the World steel production produce accurate forecasts for World GDP, confirming evidence provided by the econometric properties. Specifically, a forecast combination of the three indices produces statistically significant gains up to 40% at nowcast and more than 10% at longer horizons relative to an autoregressive benchmark.

Keywords: Global real economic activity; World steel production; Forecasting (search for similar items in EconPapers)
JEL-codes: C1 C5 C8 E1 E3 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2015-04
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Working Paper: A New Monthly Indicator of Global Real Economic Activity (2015)
Working Paper: A New Monthly Indicator of Global Real Economic Activity (2015)
Working Paper: A new monthly indicator of global real economic activity (2015)
Working Paper: A new monthly indicator of global real economic activity (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2015-13

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