A World Trade Leading Index (WTLI)

Author/Editor:

Karim Barhoumi ; Laurent Ferrara

Publication Date:

January 26, 2015

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper develops a new monthly World Trade Leading Indicator (WTLI) that relies on nonparametric and parametric approaches. 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. We also show that this cyclical indicator is able to track the annual growth rate in global trade, suggesting that the recent slowdown is due in part to certain cyclical factors. This new tool can provide policy makers with valuable foresight into the future direction of economic activity by tracking world trade more efficiently.