Construction of Composite Business Cycle Indicators in a Sparse Data Environment

Abstract

Business cycle indicators are important instruments for monitoring economic development. When employing indicators one usually relies on a sound statistical database. This paper deals with indicator development in a sparse data situation. Indicator building is merged with temporal disaggregation, which is often used by statistical offices. The discussed tools are applied in a case study for Abu Dhabi. Because the economy of Abu Dhabi is very dependent on oil, real income reflects the economic situation better than real gross domestic product (GDP). For this reason a measure of real gross domestic income (GDI) was chosen as reference series.

Keywords: business cycle indicators, temporal disaggregation, terms of trade, oil-producing countries

JEL Classification: E010, E320, C220