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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

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

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  1. 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

  2. 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)

  3. 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’

  4. 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)

  5. A Full Survey of Available Leading Indicators for Russia

  6. 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

  7. Cyclical Dynamics as It Appeared in… October 2008 (shortly after the peak) 5 regular & timely indicators

  8. Cyclical Dynamics as It Appeared in… February 2009 (near the trough) 5 regular & timely indicators

  9. Cyclical Dynamics as It Appeared in… July 2009 (shortly after the trough) 5 regular & timely indicators

  10. Cyclical Dynamics as It Appeared in…April 2010 (before the peak) 5 regular & timely indicators

  11. Cyclical Dynamics as It Appeared in… October 2010 (just now) 5 regular & timely indicators

  12. Was an Indicator Useful to Forecast Approaching Turning Point?

  13. 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

  14. Possible Extensions • Construction of weekly leading indicators for Russia • Similar audit of leading indicators for other countries (US, Germany, etc.)

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