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Activity Number: 19
Type: Topic Contributed
Date/Time: Sunday, July 29, 2012 : 2:00 PM to 3:50 PM
Sponsor: Business and Economic Statistics Section
Abstract - #304785
Title: Statistical Design of Leading Indicators: A Systematic Approach with Applications to OECD-CLIs
Author(s): Marc Wildi*+
Address: Dorfstrasse 12 E, 2563 Ipsach, , Switzerland
Keywords: MDFA ; OECD-CLI ; Real time signal extraction

Leading economic indicators aim at anticipating coherent pervasive dynamics or signals in economic data. Real-Time Signal Extraction (RTSE) is concerned with the estimation of these signals towards the sample end of the data. We contribute to the design of leading indicators by emphasizing the optimal design of real-time filters (MDFA or Multivariate Direct Filter Approach). The novelty in our latest release of MDFA concerns Regularization. Specifically, we propose to control universal characteristics of filter coefficients: the rate of decay, the smoothness and the cross-sectional flexibility (of filter coefficients). The proposed regularization-troïka alleviates overfitting effectively by reducing the number of estimated parameters without imposing unnecessarily severe constraints or `misspecifications'. Applications to OECD-CLI's for the G7 illustrate the added-value of the new facility.

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