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Is PMI a good leading indicator of industrial production?: Evidence from India

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  • Herwadkar, Snehal S.
  • Ghosh, Saurabh

Abstract

The manufacturing Purchasing Managers’ Index is often used by policy makers to gauge the ‘nerve’ of the real economy and as lead indicator of industrial activity. This paper makes an effort to evaluate whether the PMI is indeed a good lead indicator of IIP or whether by relying on PMI the policy makers are making a systematic error. Using ARDL technique, this paper largely support the claim that the PMI is a good lead indicator of industrial activity, albeit only in the short run.

Suggested Citation

  • Herwadkar, Snehal S. & Ghosh, Saurabh, 2020. "Is PMI a good leading indicator of industrial production?: Evidence from India," MPRA Paper 97924, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:97924
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    File URL: https://mpra.ub.uni-muenchen.de/97924/1/MPRA_paper_97924.pdf
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    References listed on IDEAS

    as
    1. Evan F. Koenig, 2002. "Using the Purchasing Managers' Index to assess the economy's strength and the likely direction of monetary policy," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, vol. 1(6).
    2. Bhattacharya, Rudrani & Pandey, Radhika & Veronese, Giovanni, 2011. "Tracking India Growth in Real Time," Working Papers 11/90, National Institute of Public Finance and Policy.
    3. Khundrakpam, Jeevan Kumar & George, Asish Thomas, 2012. "An Empirical Analysis of the Relationship between WPI and PMI-Manufacturing Price Indices in India," MPRA Paper 50929, University Library of Munich, Germany.
    4. Ethan S. Harris, 1991. "Tracking the economy with the purchasing managers' index," Research Paper 9124, Federal Reserve Bank of New York.
    5. Tsuchiya, Yoichi, 2014. "Purchasing and supply managers provide early clues on the direction of the US economy: An application of a new market-timing test," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 599-618.
    6. Ethan S. Harris, 1991. "Tracking the economy with the purchasing managers' index," Quarterly Review, Federal Reserve Bank of New York, vol. 16(Aut), pages 61-69.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    purchasing managers' index; economic growth; leading indicator; cross-country; ARDL; industrial activity;
    All these keywords.

    JEL classification:

    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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