Leading Indicators of Growth and Inflation in Turkey, Issues 2002-2231
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.
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asset prices autoregressive benchmark best performing bivariate forecasts candidate indicators Capacity Utilization Central Bank combination forecast based commodity price index Concurrent forecasts Consumer Price Index CPI inflation cu_pr current quarter Dividend Yield divpr estimates exchange rate forecast horizons forecast inflation forecast of GDP forecasting model full set Granger causality Gross FX Reserves growth and inflation growth rate Growth Uncertainty horizons considered House Price Index improve in-sample index first difference individual indicators industrial production Inflation Uncertainty Interest Rate International Financial Statistics Istanbul Stock Exchange lag lengths leading indicators lirescb lmon3y Log of Money Log of Real loil lpeise lrexrate M&Q NSA monetary aggregate out-of-sample forecasts outperforms output gap output growth percent performing individual forecasts predictor price earnings ratio rdiscount Real GDP Growth Real Money regression rlgold rlhouse rlresm rlstockp rovnght rtime_3mth sample period second difference Stock and Watson Stock Price Index top five performers Turkey turning point two-stage combination forecasts