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The performance of OECD's composite leading indicator

Author

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  • Mustapha Olalekan Ojo
  • Luís Aguiar‐Conraria
  • Maria Joana Soares

Abstract

This paper evaluated the performance of OECD's Composite Leading Indicator using the Continuous Wavelet Transform. We used various wavelet tools ‐ wavelet coherency, wavelet phase and wavelet phase difference ‐ to assess the co‐movement between the Composite Leading Indicator and three macroeconomic variables ‐ Industrial Production Index, unemployment rate, and real GDP Growth ‐ at each frequency and moment. We also explored the lead–lag relationship between each pair of variables across time and frequency. We concluded that OECD's Composite Leading Indicator is a useful leading indicator of the Industrial Production Index and can be suited for forecasting the unemployment rate. However, it exhibited poor performance regarding GDP growth.

Suggested Citation

  • Mustapha Olalekan Ojo & Luís Aguiar‐Conraria & Maria Joana Soares, 2024. "The performance of OECD's composite leading indicator," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2265-2277, April.
    • Handle: RePEc:wly:ijfiec:v:29:y:2024:i:2:p:2265-2277
    DOI: 10.1002/ijfe.2784
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