leading indicators for russia did they actually lead during the crisis of 2008 2009
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State University – Higher School of Economics (Moscow, Russia) “Development Center” Institute. Sergey Smirnov. Leading Indicators for Russia: Did They Actually Lead During the Crisis of 2008-2009. French-Russian Academic and Research Conference

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leading indicators for russia did they actually lead during the crisis of 2008 2009

State University – Higher School of Economics (Moscow, Russia)

“Development Center” Institute

Sergey Smirnov

Leading Indicators for Russia: Did They Actually Lead During the Crisis of 2008-2009

French-Russian Academic and Research Conference

‘Economics, Politics, Society: New Challenges, New Opportunities’

Moscow, October 2010

main purpose limitations
Main Purpose & Limitations

Purpose

  • Not to construct a new (‘really good’) leading indicator
  • But to test existing ones in their ability to predict cyclical turning-points in ‘real-time’

Limitations

  • Only last recession (2008-2010)
three consecutive tasks
Three Consecutive Tasks
  • To survey all available cyclical indicators for Russia
  • To choose regularly (monthly) published between them
  • To check the last ones for their practical usefulness in ‘real-time’
general logic methods
General Logic & Methods

Main question

  • Was it actually possible to predict a turning point some months before it occurred – relying on the dynamics of one or another leading indicator?

Some technical remarks

  • All calculations are based on the concept of ‘growth rate cycles’ (not classic ‘business cycles’)
  • Y-o-Y percent changes (‘a month to the same month of the previous year’) are considered
  • Official ‘basic branches of economy’ index is used as a proxy for coincident cyclical index (CCI)
five indicators at five moments in the past
Five Indicators at Five Moments in the Past

5 moments in the past

  • Oct. 2008 (shortly after the peak)
  • Feb. 2009 (near the trough)
  • July 2009 (shortly after the trough)
  • April 2010 (before the peak)
  • Oct. 2010 (just now)

5 regular & timely indicators

  • PMI by Markit
  • CLI by OECD
  • CLI by DC
  • ICI by HSE
  • IOI by IET
cyclical dynamics as it appeared in october 2008 shortly after the peak
Cyclical Dynamics as It Appeared in… October 2008 (shortly after the peak)

5 regular & timely indicators

cyclical dynamics as it appeared in february 2009 near the trough
Cyclical Dynamics as It Appeared in… February 2009 (near the trough)

5 regular & timely indicators

cyclical dynamics as it appeared in july 2009 shortly after the trough
Cyclical Dynamics as It Appeared in… July 2009 (shortly after the trough)

5 regular & timely indicators

conclusions
Conclusions
  • Between monthly indicators the CLI by DC is the champion! Its trajectory during this crisis looks like as if it is taken from a textbook (see the chart on the left)
  • Unexpected: CLI by OECD is almost entirely useless in forecasting turning points (because of too large a lag and maybe some ‘oversmoothing’)
  • Other leading indicators for Russia are more or less useful but their track records are not very impressive
possible extensions
Possible Extensions
  • Construction of weekly leading indicators for Russia
  • Similar audit of leading indicators for other countries (US, Germany, etc.)
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