Describe and explain the typic
Describe and explain the typicalbehavior of the Conference Board’s Composite Indexes of Leading,Coincident and Lagging Indicators: Explain in detail.
1. 6 months beforethe beginning of an economic recession.
2. 6 months after thebeginning of an economic recession?
ANSWER : –
Composite indexes of coincident and leading indicators ofeconomic activity were first developed to respond to policymakers’needs for a reliable indication of economic activity in advance ofthe release of the relevant statistical data. A coincidentindicator can be broadly defined as a variable that is correlatedwith the current level of economic activity
A composite indicator is constructed by compiling individualindicators into a single index, based on an underlying model of themulti-dimensional concept that is being measured4 . The CompositeEconomic indicators (CEI) are the most used composite indicatorsand the components that build these indicators usually origins fromstatistics.
Composite Economic indicator (CEI,) concept Some DefinitionsMacroeconomic indicators mainly explains the short-term economicdevelopment in the economy. They can be divided in two groups;cyclical indicators following a reference series, i.e. GDP, andnoncyclical indicators that measure special phenomena such asproductivity or competitiveness. These indicators aim to measurethe state of, and efficiency in, the national economy. Cyclicalindicators (with reference series), which are the most commoncyclical indicators, measures the business cycle development. Theyshow the same cyclical pattern as their reference series, usuallyGDP or IPI. They can be leading, coincident or lagging in theirpattern toward the reference series. Non-cyclical indicators do notshow the same pattern as GDP, but can give additional informationof the short-term economic change. They do not usually havereference series and may be based on mathematical models. They mayseem less transparent for users. 6 See also chapter 4. Compositeeconomic indicators Macroeconomi indicators Cyclical indicatorsSentiment components Other components Non-cyclical indicatorsSentiment components Other compoments