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Original scientific paper

Constructing a composite coincident indicator for a post-transition country

Ivana Rašić Bakarić orcid id
Marina Tkalec
Maruška Vizek

Full text: english pdf 1.260 Kb

page 434-446

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


Business cycle; coincident indicator; dynamic factor model; Markov switching model; economic activity; macroeconomic forecasting

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