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ALICE: Composite leading indicators for euro area inflation cycles

Author

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  • de Bondt, Gabe J.
  • Hahn, Elke
  • Zekaite, Zivile

Abstract

This paper develops Area-wide Leading Inflation CyclE (ALICE) indicators with the aim to provide early signals for turning points in the euro area headline and core inflation cycles. The headline (core) ALICE leads the reference cycle by three (four) months and the lead times extend to five (nine) months based on longer-leading series. Both ALICE indicators signalled turning points in the inflation cycles ex post and also performed well in a simulated real-time exercise. Moreover, in particular the headline ALICE also appeared to be useful for quantitative forecasting of the direction and level of inflation.

Suggested Citation

  • de Bondt, Gabe J. & Hahn, Elke & Zekaite, Zivile, 2021. "ALICE: Composite leading indicators for euro area inflation cycles," International Journal of Forecasting, Elsevier, vol. 37(2), pages 687-707.
    • Handle: RePEc:eee:intfor:v:37:y:2021:i:2:p:687-707
    DOI: 10.1016/j.ijforecast.2020.09.001
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    3. Brückbauer, Frank & Schröder, Michael, 2021. "Data resource profile: The ZEW FMS dataset," ZEW Discussion Papers 21-100, ZEW - Leibniz Centre for European Economic Research.

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