Prediction of business cycle of Poland

Abstract

The paper is focused on the construction of a new composite indicator intended to predict the economic cycle of Poland and its comparison with the existing CLI used by international institutions such as OECD and Eurostat. In part, this research is also dedicated to monitoring the partial advance cyclical indicators that make up the CLI components and their changes over time. The paper explores 62 qualitative and quantitative economic indicators of Poland and their relationship to the development of monthly GDP at constant prices in three different time periods: 2005 to 2021, 2010 to 2021, and 2016 to 2021. A modified OECD method is used to select the cyclical component of time series using the Hodrick-Prescott filter and subsequently employ cross-correlation of the variables with the cyclical component of GDP. The constructed CLI can predict the evolution of the CLI one month ahead with a cross-correlation level of 0.879 under equal weights and 0.877 under different weights. Research has shown that there is no significant change in the composition of the CLI for the prediction of the economic cycle of Poland when using the established methodology. © 2022, Centre of Sociological Research. All rights reserved.