Business Cycle Leading Indicators for the Tunisian Economy

Souhir Slimi and Abdelwahed Trabelsi

No 617, Working Papers from Economic Research Forum

Abstract: This paper investigates the Tunisian business cycle with an objective of constructing an index for an early detection of the recession periods using parametric and non-parametric methods. First, several indicators are studied separately. Then, a combined approach based on the MSVAR Model of Krolzig (1997), is considered to study the adequacy of the leading composite indicator as a tool of detecting the occurrence of recessions. We find that financial variables rapidly respond to changes of economic conditions and encompass market expectations regarding future economic activity. Therefore, a revised composite indicator with the inclusion of financial variables constitutes a more reliable tool for economic authorities to be used in detecting recessions.

Pages: 22
Date: 2011-01-08, Revised 2011-01-08
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