Leading Indicators of Growth and Inflation in Turkey
Johns Hopkins University
International Monetary Fund (IMF)
IMF Working Paper No. 02/231
Growth and inflation in Turkey have been volatile over the last two decades. It would, therefore, be useful to identify indicators that anticipate economic conditions and inflation. This paper investigates the predictive performance of economic indicators for inflation and real output growth in Turkey. We find that (i) the forecasting ability of individual indicators is unstable; but that (ii) a suitable combination of these unstable forecasts yields a forecast that reliably outperforms that generated by an autoregressive model. We then propose a two-stage combination forecast obtained by taking the median of the top five performing individual forecasts. This two-stage forecast reliably improves on autoregressive benchmarks and outperforms the combination forecast based on all the individual forecasts.
Number of Pages in PDF File: 28
Keywords: Growth inflation combination forecasts leading indicators inflation targeting Turkey
JEL Classification: E31 E32 E37 E58 F43 O52
Date posted: February 15, 2006
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