Analysis of cyclical behaviour of investment expenditures for the Turkish economy

Abstract

This article aims to analyse the cyclical behaviour of fixed investments in Turkey and then construct a Composite Leading Indicators Index (CLI) to forecast the turning points of investment. The cycles of investment and selected leading indicators are identified following the growth cycle approach. The series are detrended using the Hodrick–Prescott (HP) detrending filter. After identification of the cycles and turning points of the selected leading indicators, they are combined into a single composite index. Then a probit model is estimated to evaluate the forecast performance of the composite index. The results show that the constructed CLI is considered to be helpful in monitoring and predicting investment expenditures.

Keywords:

• investment
• growth cycle
• turning points
• composite leading indicators index
• probit model

JEL Classification:

• C32
• E27
• E32

Notes