A quasi real-time leading indicator for the EU industrial production

Michael Donadelli, Antonio Paradiso () and Max Riedel

No 118 [rev.], SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We build a quasi real-time leading indicator (LI) for the EU industrial production (IP). Differently from previous studies, the technique developed in this paper gives rise to an ex-ante LI that is immune to "overlapping information drawbacks". In addition, the set of variables composing the LI relies on a two-steps dynamic and systematic procedure. This ensures that the choice of the variables is not driven by subjective views. Our LI anticipates swings (including the 2007-2008 crisis) in the EU industrial production - on average - by 2 to 3 months. If revised, its predictive power largely improves. Via a couple of standard empirical exercises we show that the proposed LI (i) forecasts crises' phases better than the ex-post LIs proposed by the OECD and the Conference Board and (ii) captures the interest rate policy pattern rather well.

Keywords: Leading indicator; EU industrial production; Granger causality; Turning points; Forward-looking Taylor rule (search for similar items in EconPapers)
JEL-codes: C22 C52 E32 (search for similar items in EconPapers)
Date: 2016, Revised 2016
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: A Quasi Real‐Time Leading Indicator for the EU Industrial Production (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:118r

DOI: 10.2139/ssrn.2694608

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