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Leading Indicators of Euroland Business Cycles

Ulrich Fritsche () and Felix Marklein
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Felix Marklein: Humboldt University Berlin

Macroeconomics from University Library of Munich, Germany

Abstract: The introduction of a common monetary policy in eleven European countries increased the need for leading indicators for that area. A reliable leading indicator should possess the following properties: (1) The movements in the indicator series should resemble those in the business cycle reference series. (2) The relation between the reference series and the indicator should be statistically significant and stable over time. (3) The inclusion of the indicator in out-of-sample forecasting procedures should improve the predictive power. Our analysis deals with tests for these requirements applied to Euroland data. We use frequency domain analysis, Granger-causality tests and out-of sample forecasts. Only a few indicators pass all tests, while the non-monetary indicators perform best.

Keywords: Business Cycle; Leading Indicators; EMU; Eurozone; Euroland (search for similar items in EconPapers)
JEL-codes: E32 L60 L70 (search for similar items in EconPapers)
Date: 2001-02-28
Note: Type of Document - PDF; prepared on IBM PC; pages: 33 ; figures: included. We would like to reduce our mailing and xerox cost by posting it.
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