Title: On the construction of composite economic indicators: The case of a new EU member state
Authors: Boriss Siliverstovs - Bank of Latvia (Latvia) [presenting]
Abstract: Composite economic indicators (CEIs) for business cycle monitoring for a transition economy (Latvia) are constructed. The data are characterised by rather large revisions of official statistics (GDP growth) and time series properties of national economic indicators are dominated by the rather small number of observations pertaining to the great financial crisis. The lessons from our exercise is that when constructing composite economic indicators the informative content of data transformations of underlying individual economic/financial indicators varies with business cycle phases. We advocate that instead of focusing on one version of composite economic indicator based on a pre-selected set of transformations of individual time series, several versions of CEIs need to be monitored in order to be able to judge economic outlook in a credible and timely manner.