A World Trade Leading Index (WTLI)
IMF Working Papers, January 26, 2015
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- A World Trade Leading Index (WTLI)
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Bibliographic details
- Authors: Karim Barhoumi, Laurent Ferrara
- Published: January 26, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498307543.001
Overview and purpose
- This paper develops a new monthly World Trade Leading Indicator (WTLI) that relies on nonparametric and parametric approaches.
- The WTLI is designed to provide policy makers with valuable foresight into the future direction of economic activity by tracking world trade more efficiently.
Key findings and evidence
- Compared to the CPB World Trade Monitor’s benchmark indicator for global trade the WTLI captures turning points in global trade with an average lead between 2 and 3 months.
- The WTLI is able to track the annual growth rate in global trade, suggesting that the recent slowdown is due in part to certain cyclical factors.
- The WTLI is constructed on a monthly frequency and combines nonparametric and parametric methodologies to capture trade cycles.
Implications for analysis and policy
- The WTLI can provide policy makers with valuable foresight into the future direction of economic activity by tracking world trade more efficiently.
- Because the WTLI captures turning points with an average lead between 2 and 3 months, it can be used as an early signal for changes in global trade conditions that may affect macroeconomic policy decisions.