Seminar on Composite Indicators for Economic Activity (CIEAs)
BACKGROUND
Policymakers need a clear indication of the state of the economy at any moment in time. They also need to have a high degree of understanding of the economy’s short- and medium-term prospects. This is often done by looking at different individual indicators. Comprehensive indicators like GDP suffer from the limitation of low frequency and delayed availability. Such challenges can be mitigated by using Composite Indicators for Economic Activity (CIEA). Composite indicators summarise the complex multi-sectoral economic dynamics into a one-dimensional index constructed by weighting and aggregating individual components or indicators of economic activity. CIEA is also useful for business cycle analysis and inference, which are important for macroeconomic management. As a proxy to business cycle movements, CIEA provides information on turning points which can give early signals for recessions and booms, and thereby guide timely and appropriate policy response. While CIEAs are popular in developed countries, low-income and other developing countries have somewhat lagged in developing and using them in policy making. It is against this background that MEFMI will be conducting a seminar on the development and use of CIEA to improve macroeconomic policy decisions.
OBJECTIVE
The objective of this course is to equip participants with skills to work on data treatment for high-frequency indicators for purposes of developing CIEA.
CONTENT
1. Background on Business Cycle Analysis (Business cycle & growth cycles);
2. Introduction and Rationale of CIEAs;
3. Development of CIEAs (Methodological Steps to computing Composite Indicators);
4. High-Frequency Data Treatments (Seasonal adjustment and trend cycles computations);
5. Aggregation Methods (Conference Board, Method, Principal Components, Other);
6. Predicting Turning Points (Use of Diffusion Index and other Methods – growth cycles); and
7. Use of CIEAs on macro-fiscal analysis and policy making.
TARGET GROUP
This course targets junior to mid-level officials involved in monetary and fiscal policy formulation from officials from central banks, ministries of finance/ planning, and statistics offices, revenue authorities, and other institutions.
