The Composite Coincident Indicator (CCI) for Business Cycles

Abstract

The aim of this paper is to introduce a composite coincident indicator for the Slovak economic cycle. The theoretical part of the work is concentrated on the analysis of current monitoring options of economic cycle using GDP, industrial production index and composite indicators. The analytical part of the work pays attention to authors' own composite coincident indicator and to testing its monitoring capabilities. Methodology used in this paper is a combination of the methodologies by the OECD, Conference Board and the authors of this paper. Such methods as seasonally adjusted time series, Hodrick-Prescott filter, standardization and cross-correlations are used as applied to 134 indicators of Slovak economy. Coincident cyclic indicators are selected from them, as they form the basis for Slovak composite coincident indicator. The resulting coincident composite indicator for Slovakia is made up of four indicatorsemployment in manufacturing, export of goods and services, the number of hours worked in industry and industrial turnover. The assembled indicator is then tested over time and a need for change in its composition as a result of significant economic changes is grounded. Significant changes in the composition of coincident cyclical indicator for 2010 are also proved. For the period of 2010-2015 a new composite coincident indicator is suggested of the composition of production index in the construction industry, a factor limiting production -insufficient demand, unemployment in the age group of 25-74 y.o. and short-term interest rate.

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