engleski

Constructing a composite coincident indicator for a post-transition country

The aim of this paper is to construct a monthly coincident indicator of real economic activity in Croatia. For that purpose we use a database containing alltogether 278 time series ranging from January 1998 to December 2010. In the first step we use correlation analysis, logit and Markov switching model in order to select time series which closely follow the overall business cycle and its turning points. The following four series have been detected as having best coincident properties: industrial production, volume of retail sales, VAT revenues and total credit to households. In the second step we apply dynamic factor model to aforementioned coincident series in order to estimate their common component which is than used to construct a monthly coincident indicator of real economic activity.

coincident indicator ; dynamic factor model ; business cycle

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