The Leading indicators of the economic cycles in Lithuania
LTReikšminiai žodžiai: Leading indicators; Economic cycles; Prediction; GDP; Lithuania.
ENThe identification of the leading indicators that precede economic events and predict the next phase of the economic cycle is undoubtedly an important issue seeking to protect a country against recession or other negative economic events. The literature analysis shows that leading indicators vary across the countries and time. Therefore the aim of this research is to analyse potential leading indicators and identify the best predictors of the economic cycles in Lithuania. Various economic, industrial, financial, real estate market indicators as well as consumer and business expectations are analysed in order to find out which indicators cause the changes in the growth rate of GDP. The analysis is based on Granger causality test and autoregressive distributed lag model. The research shows that economic indicators such as consumption expenditure of households, government debt, compensation of employees, unemployment and others are weak predictors of the growth rate of GDP. Volume index of intermediate goods production is the best predictor in the group of industry data as it holds predictive attributes even three years before the changes in economy. The same conclusion can be made considering two financial indicators, i.e. short-term interest rate and the value of stock market index. Real estate market data such as residential buildings permits and growth rate in house price index can also warn about the changes in the growth rate of GDP two years before. Nevertheless, consumer and business expectations are the most important for the prediction of the changes in the growth rate of GDP. [From the publication]
