Prediction of business cycle of Poland

65 Tkaco a, A., Ga u o a, B., & Kelemen, K. (2022). P edic ion o business cycle o Poland. Jou nal o In e na ional S udies, 15(3), 65-81. doi:10.14254/2071- 8330.2022/15-3/5 P edic ion o business cycle o Poland And ea Tkaco a Facul y o Economics, Technical Uni e si y o Košice, Nemco ej 32, 040 01 Kosice, Slo ak Republic and ea. ka[email p o ec ed] ORCID 0000-0003-0268-009X Bea a Ga u o a Facul y o Managemen and Economics, Tomas Ba a Uni e si y in Zlín, Mos ní 5139, 760 00 Zlín, Czech Republic ga u o a@u b.cz ORCID 0000-0002-0606-879X Ka a ina Kelemen Facul y o Economics, Technical Uni e si y o Košice, Nemco ej 32, 040 01 Kosice, Slo ak Republic ka a ina.kelemen@ uke.sk ORCID 0000-0003-3540-1093 Abs ac . The pape is ocused on he cons uc ion o a new composi e indica o in ended o p edic he economic cycle o Poland and i s compa ison wi h he exis ing CLI used by in e na ional ins i u ions such as OECD and Eu os a . In pa , his esea ch is also dedica ed o moni o ing he pa ial ad ance cyclical indica o s ha make up he CLI componen s and hei changes o e ime. The pape explo es 62 quali a i e and quan i a i e economic indica o s o Poland and hei ela ionship o he de elopmen o mon hly GDP a cons an p ices in h ee di e en ime pe iods: 2005 o 2021, 2010 o 2021, and 2016 o 2021. A modi ied OECD me hod is used o selec he cyclical componen o ime se ies using he Hod ick-P esco il e and subsequen ly employ c oss-co ela ion o he a iables wi h he cyclical componen o GDP. The cons uc ed CLI can p edic he e olu ion o he CLI one mon h ahead wi h a c oss-co ela ion le el o 0.879 unde equal weigh s and 0.877 unde di e en weigh s. Resea ch has shown ha Recei ed: Janua y, 2022 1s Re ision: June, 2022 Accep ed: Sep embe , 2022 DOI: 10.14254/2071- 8330.2022/15-3/5 Jou nal o In e na ional S udies Scien i ic Pape s © Founda ion o In e na ional S udies, 2022 © CSR, 2022 Jou nal o In e na ional S udies Vol.15, No.3, 2022 66 he e is no signi ican change in he composi ion o he CLI o he p edic ion o he economic cycle o Poland when using he es ablished me hodology. Keywo ds: Business Cycle, Composi e Leading Indica o (CLI), GDP, C oss- co ela ion, P edic ion. JEL Classi ica ion: E32, E37. 1. INTRODUCTION Moni o ing o he business cycle has been a he o e on o economic esea ch since he 1920s, mainly due o he ins abili y o he economy and he subsequen G ea Dep ession in he 1930s. In he 1950s and he 1960s, he business cycle seemed o be “dead”, bu he 1970s and he oil c ises b ough i back in o he spo ligh and new economic heo ies came along ying o explain he causes o i s o igin (Be ge, 2011). A new wa e o in e es in obse a ion and p edic ion o he economic cycle occu ed a he ime in he 21s cen u y ha will go down in his o y as a pe iod ull o signi ican economic shocks ha o en could no be eliably p edic ed. The deep nega i e e ec s o he inancial c isis in 2008, he subsequen wa e o he ex eme public deb s o he Eu opean coun ies, he unexpec ed global onse o he co ona i us pandemic in 2019, and he wa in Uk aine ha e aised he ques ion o whe he and o wha ex en we a e able o p edic he possible u u e de elopmen o na ional economies. Cu en ly, he e a e a ious app oaches o p edic ing business cycles using econome ic models (Cla k & Ra azzolo, 2015; Fe a a, 2015; Ba houmi, 2016; Bjø nland, 2017; Pawę a, 2018; Kliuchnika a, 2022). Some au ho s use speci ic gene al indexes (Gaweł & Głodowska, 2021; Wachi a, 2022; Ba os e al. 2021, 2022), howe e , globally he a en ion is ocused on p edic ions wi h he help o composi e leading indica o s (CLIs). A Composi e Leading Indica o (CLI) is an index ha agg ega es he ime se ies summa ising in o ma ion con ained in a numbe o key sho - e m economic indica o s known o be associa ed wi h he business cycle (Zalewski, 2008). The economic cycle is ep esen ed by he de elopmen o GDP, indus ial p oduc ion index o Composi e Coinciden Indica o (CCI) (A noš o á e al., 2011; Baca ić e al., 2016). CLI p o ides quali a i e da a on sho - e m economic mo emen s. CLI d aws much a en ion because i should be able o p edic he u u e s a es o economic ac i i y – when he economy is going o swi ch om he expansion phase in o he con ac ion phase o ice e sa (V aná, 2008). De e mina ion o u ning poin s is one o he main bene i s o using CLI (Baka ić e al, 2016). I is impo an o no e ha CLIs o e in o ma ion abou he expec ed de elopmen o he economy, and hus open a deba e on he implemen a ion o decisions in he public o p i a e sec o (Monni e al. 2017; Fabuš, 2017). This is a sho - e m es ima e o he u u e economic si ua ion, bu i can poin o impo an economic changes ha a e he u ning poin s o he economic cycle (K amoliš, 2015; Mazu , 2017, Döpke e al. 2017). In addi ion o he p edic ion i sel , CLI can also be used o analyse he pe o mance o economies and hus, o compa e hei pe o mance wi hin di e en g oups (Sal elli, 2006). The composi e leading indica o s also possess own disad an ages and limi s ha a e isible in hei p ac ical use ha is common o he composi e indica o s (see Djogo & S anišić, 2016; Roszko-Wój owicz & Białek, 2016; Šego a e al., 2017). Among he undamen al issues, i is possible o conside he inco ec selec ion o he e e ence se ies o an insu icien ly la ge g oup o sub-indica o s. When using CLI, i is mainly abou he a ailabili y o he alse signals and misin e p e a ion o he esul s (Saisana & Ta an ola, 2002; Eu os a , 2017). Fo he economic policy measu es de i ed om he CLI p edic ion, i is necessa y o be cau ious and o ake in o accoun he impac o se e al ac o s, such as he de elopmen o CLI pa ial indica o s, he And ea Tkaco a, Bea a Ga u o a, Ka a ina Kelemen P edic ion o business cycle o Poland 67 o e all na u e o he economy, he causes o nega i e de elopmen s (p oblems o he banking sec o , public inances, de elopmen s in he c edi ma ke , he quali y o business en i onmen , economic de elopmen s in he o he coun ies depending on he openness o he economy, and he o he aspec s. (T a kina, 2015; Jan o-D ozdowska & Majewska, 2016; Fuinhas e al., 2016; Sachpazidu-Wójcicka, 2017; Dobeš e al. 2017; Ko sakienė e al. 2017). One o he mos impo an ac o s ha can shi signi ican ly p edic ion esul s is he high sha e o in o mal economy (Digdowiseiso & Sugiyan o, 2021; Jo o ic, 2021; Mishchuk e al., 2018) as well as unce ain y in inno a ions and knowledge-based ac i i ies de elopmen (Ebong & Babu, 2020; Oliinyk e al., 2021; Wasiluk & Gine ičius, 2020). I is equally impo an ha some iscal policy decisions can only be posi i e o he economy in he sho e m, bu in he long un, hey may be coun e p oduc i e (Ko sakienė e al. 2015; Ciegis e al., 2015; Laj kepo á, 2016; Vochozka e al. 2020, 2021). Due o he ad an ages o CLI, he na ional s a is ical o ices, he na ional banks, as well as he speci ic en e p ises, p ima ily wi h an indus y o ien a ion, a e de o ed o explo e hei cons uc ion and subsequen ly, o analyse hese poin s. CLI possesses an impo an posi ion in he sho - e m economic o ecas s o he Eu opean coun ies, he Uni ed S a es o Ame ica, and Japan. A he in e na ional le el, he o ganisa ions such as he OECD and Eu os a pay a signi ican a en ion o hem. They p e e a di e en CLI design app oach and hence, hey use mainly he same CLI composi ion o he selec ed coun y o a long ime. This esul s in quali y p edic ion capabili ies o CLI no being achie ed o some economies. Fo his eason, i is necessa y o e i y he p edic i e capabili ies o exis ing CLIs and, i necessa y, c ea e new composi e p e-hea indica o s. Fo economies, which ha e unde gone he signi ican changes in he pas , i can be assumed ha he composi ion o hei CLI will change o e ime. The ansi ional economies can be conside ed such coun ies. Fo he pu poses o his pape , Poland was selec ed as he coun y unde s udy due o he insu icien p edic i e abili y o CLI by he OECD and Eu os a and his is analysed in mo e de ail in he gi en pape . The aim o he p esen con ibu ion is o c ea e an own composi e leading indica o o he business cycle o Poland and compa e i wi h he exis ing CLIs. The esea ch ques ion is also aised whe he he e eally is a change in he composi ion o he CLI in he case o Poland o e ime. 2. LITERATURE REVIEW The economis s a he na ional and in e na ional le el a e engaged in he cons uc ion o he CLI o he economic cycle o Poland. The bes -known in e na ional me hodologies o he cons uc ion o Poland's CLI a e ep esen ed by he OECD and Eu os a p ocedu es. Thei modi ica ions can be seen in he s udies o he au ho s such as Bandholz (2005), Zalewski (2009), Jakubíko á e al. (2014), and V aná (2018). The me hodology o he OECD and Eu os a is based on he g ow h cycle, while he ime se ies can be di ided in o he andom, end, seasonal, and cyclical componen s (T imbu , 2006). Fo u he in es iga ion, he cyclical componen is selec ed om he ime se ies. The i s impo an s ep is he selec ion o a e e ence se ies ha ep esen s he economic cycle o he gi en economy. The s udies o e se e al op ions o a selec ion o he e e ence se ies o Poland. The mon hly index o he indus ial p oduc ion (o manu ac u ing p oduc ion) is he mos commonly used measu e o economic ac i i y (Bandholz, 2005). The i s eason is ha i is a ailable p omp ly and on a mon hly basis in con as o GDP. Secondly, i cons i u es he mos cyclical subse o he whole economy. Mo eo e , o many coun ies i was ound ha cyclical p o iles o GDP and IIP a e s ongly ela ed. An ob ious disad an age o employing GDP ins ead o IIP is ha GDP is e y o en e ised by he Cen al S a is ical O ice and i is a subjec o signi ican changes (OECD, 2006). Acco ding o he OECD me hodology, he IIP was applied o cons uc CLI un il 2012 o Poland and om 2012 i was a mon hly ime se ies o GDP a cons an p ices (Fulop & Gyomai, 2012). GDP is also p e e ed by Eu os a (2017), Bandholz (2005), Zalewski (2008), and Jakubíko á e al. (2014). On he o he hand, au ho s such as A is e al. (2004) and V aná (2018) p e e he use o IIP. In Jou nal o In e na ional S udies Vol.15, No.3, 2022 68 hei opinion, GDP o Poland shows oo li le cyclical a ia ion and is hus no he app op ia e measu e o moni o ing business cycle luc ua ions. A b ie compa ison o he elemen a y di e ences in he cons uc ion o he OECD CLI and Eu os a composi e indica o s is p esen ed in Table 1. Table 1 Compa ison o in e na ional me hodologies o CLI cons uc ion C i e ia Eu os a OECD Type o business cycle G ow cycle G ow cycle Coun ies Chosen coun ies o Eu opean Union, Eu ozone Membe s o OECD, a ew nonmembe coun ies T end de e mina ion Hod ick P esco Fil e Ch is iano Fi zge ald Fil e Re e ence se ies GDP Index o indus ial p oduc ion ( o 2012) GDP (since 2012) Rela ionship be ween e e ence se ies and indica o s C oss co ela ion C oss co ela ion Type o da a Quali a i e da a Quan i a i e and quali a i e da a Pe iod o da a Mon hly da a Mon hly da a Wages o componen s Digge en wages o all componen s Same wages o all componen s Sou ce: Au ho s’ esul s. The p edic ion possibili ies o he cyclical de elopmen o Poland's economy a e discussed in he s udies by D ozdowicz-Bieć (2001), Ma kowski (2002), Nilsson (2006), Ga cza czyk & Skikiewicz (2011), Lena e al. (2016) o Mazu (2017). Ano he au ho Bandholz (2005) applies GDP as he e e ence se ies and hus, he c ea es he CLI o Poland and Hunga y om qua e ly da a o he pe iod 1994 o 2004. Employing he linea and non-linea dynamic ac o modelling app oaches, he inds o he bo h coun ies ha a pa simonious speci ica ion ha combines he na ional business cycle indica o s, he se ies e lec ing ade olumes, and he sup ana ional business expec a ions making o he mos eliable business cycle leade s. The composi e leading indica o s signi ican ly cause a GDP g ow h, while he es ima ed Ma ko - swi ching p obabili ies o being in a ecessiona y s a e ag ee well wi h a p io i de e mined cycle ch onologies. The esul ing CLI o Poland is composed o a sys em o he equal and di e en weigh s and i con ains he six componen s. Zalewski (2009) applies he modi ied o m o he OECD me hodology and hus, he chooses mon hly IIP da a o he pe iod 1992 o 2007 as he e e ence se ies. Based on he analysis o he 15 economic indica o s o Poland, he compiles he CLI, which consis s o six esul ing componen s. He compa es he cons uc ed CLI wi h he de elopmen o ESI and Ma kowski (2002), e alua ing ha his cons uc ed CLI indica es ewe alse signals and he e o e, i p o ides a be e sho - e m p edic ion. Jakubíko a e al. (2014) explo ed he de elopmen o he economic cycle o he V4 coun ies wi h a e e ence se ies o GDP a cons an p ices. Using he analysis o he qua e ly da a o he pe iod 2005 o 2011, hey poin ed ou he sho comings in he OECD p edic i e abili y o Poland. In he explo ed pe iod, he highes alue o he OECD CLI c oss-co ela ion was 0.489, while Eu os a ESI s ood a a le el o 0.798. Subsequen ly, acco ding o he modi ied OECD me hodology, a CLI was compiled o Poland oo, and i consis ed o he six componen s also. Fo he V4 coun ies, he CLI has been shown o ha e a di e en composi ion o each coun y. V aná (2018) applied an inno a i e app oach o he cons uc ion o he CLI, which consis s in including a iables om o he coun ies among he selec ed cyclical indica o s. To compile CLI o Poland, i ollows he de elopmen o indica o s in Aus ia, Ge many, he Czech Republic and Slo akia o he pe iod 1996 o 2016 wi h he e e ence se ies o GDP. He a gues ha he economies o some coun ies a e And ea Tkaco a, Bea a Ga u o a, Ka a ina Kelemen P edic ion o business cycle o Poland 69 small and hei economic si ua ion is o en ela ed o he de elopmen o he business cycle in o he coun ies. Acco ding o he s udy, he esul ing CLI o Poland ac ually achie es he bes p edic i e capabili ies when inco po a ing indica o s om he moni o ed coun ies. The a ailable CLIs o Poland we e compa ed based on selec ed c i e ia such as a CLI composi ion, lead size and CLI c oss-co ela ion alue (Table 2). Table 2 Compa ison o he cons uc ion o he composi e indica o s o Poland Au ho Obse ed pe iod Indica o cons uc ion Time pe iod ad ance C oss- co ela ion alue Bandholz (2005) 1994-2004 (qua e ly da a) CLI ( e e ence se ies GDP): Desc ibes demand endency in manu ac u ing, Nominal e ec i e exchange a e, Business expec a ions o Wes e n Eu ope 1 Q 0.75 Zalewski (2009) 1992-2007 (mon hly da a) CLI ( e e ence se ies IPP): Na ow Money (M1) Index 2000=100 SA, Manu ac u ing indus y (Selling p ices, Fu u e endency), Manu ac u ing indus y (P oduc ion Tendency), Sho - e m in e es a es, Manu ac u ing indus y (P oduc ion, Fu u e Tendency), Ne ade in goods ( alue) in billions o US dolla s SA - 0.788 Jakubíko á e al. (2014) 2005-2011 (qua e ly da a) CLI ( e e ence se ies GDP): P oduc ion in manu ac u ing indus y, 2005 = 100 Mone a y agg ega e M1, 2005 = 100 Wa szawski Indeks Giełdowy, 2005 = 100, Indus y u no e , (in e media e p oduc and capi al goods), domes ic ma ke , 2005 = 100 Indica o o con idence in he cons uc ion indus y 2 Q 0.886 V aná (2018) 1996-2016 (mon hly da a) CLI ( e e ence se ies GDP): 9 in e na ional componen s (Aus ia, Czech Republic, Ge many, Slo akia) and 6 na ional componen s: Business endency su eys (cons uc ion), Sha e P ices, Business endency su eys (manu ac u ing), In e na ional T ade (Impo s, goods), Business endency su eys (se ices- business si ua ion), Business endency su eys (se ices - con idence indica o s) 3 M 0.790 OECD* (2022) 2005-2021 2010-2021 2016-2021 (mon hly da a) CLI ( e e ence se ies GDP): Real e ec i e exchange a es - CPI Based (2015=100) in e ed 3-mon h WIBOR (% pe annum) in e ed Manu ac u ing - P oduc ion: endency (% balance) Job acancies: un illed (numbe ) P oduc ion o coal ( onnes) 10 M 9 M 9 M 0.442 0.578 0.588 Eu os a * (2022) 2005-2021 2010-2021 2016-2021 (mon hly da a) CLI ( e e ence se ies GDP): Con idence indica o in indus y, Con idence indica o in he se ice, Consume con idence indica o , Con idence indica o in cons uc ion, Con idence indica o in e ail 1 M 0 M 0 M 0.756 0.811 0.921 No e: * own calcula ions Sou ce: Au ho s’ esul s Jou nal o In e na ional S udies Vol.15, No.3, 2022 70 In he case o CLI OECD and ESI Eu os a , he alues we e calcula ed by he au ho s o he pape . By compa ing he obse ed s udies, he di e ence in he p edic i e abili ies o CLI is no iceable. The eason is mainly di e ences in he CLI calcula ion me hodology, bu also in he ype and pe iodici y o moni o ed a iables and he leng h o he ime se ies. The p edic i e capabili ies o he OECD and Eu os a CLIs, which we e calcula ed by he au ho s o his s udy om h ee di e en leng h ime se ies wi h unchanged CLI composi ion, a e in e es ing. In he case o he OECD, a p edic ion pe iod o up o 9 o 10 mon hs was ound, bu wi h a low c oss-co ela ion alue o 0.442 o 0.588. This means ha wi h his composi ion, he CLI gi es many alse signals abou he changes in he Polish business cycle. On he con a y, he ESI showed a high co ela ion alue om 0.756 o 0.921, bu a he ime o he coincidence o a mon h in ad ance. 3. METHODOLOGY The main goal o he pape is he cons uc ion o a new composi e leading indica o (CLI) designed o p edic he de elopmen o he business cycle in Poland. A pa ial objec i e is o de e mine whe he he leng h o he ime se ies signi ican ly a ec s he g oups o he cyclical leading indica o s ha can o m CLIs. Fo c ea ion o CLI, a modi ied OECD me hodology is employed. I is based on a cons uc ion wi h he g ow h cycle (De V oey & Pensie oso, 2006). This is mo e app op ia e o apply in he case o he ansi ional economies such as Poland (Czesaný e al., 2007). The mon hly GDP indica o a cons an p ices is selec ed as he e e ence se ies ha is gene ally conside ed he b oades indica o o economic ac i i y (Czesány & Jeřábko á, 2009a). Only i s cyclical componen is used in he analyses (Czesány & Jeřábko á, 2009b; As ol i e al., 2016). The indica o s, whose ela ion o GDP is moni o ed include, he 62 quan i a i e and quali a i e indica o s om he ields o indus y, se ices, e ail, cons uc ion, o eign ade, labo ma ke , mone a y agg ega es, s ock indices, con idence indica o s, consume expec a ions as well as he GDP componen s hemsel es. The da a sou ces a e he da abases o he OECD, Eu os a and he Polish S a is ical O ice. All he a ailable ime se ies om Janua y 2005 o No embe 2021 wi h mon hly pe iodici y a e included in he analysis. The ela ionship o he a iables o GDP in he pe iods 2005 o 2021, 2010 o 2021, and 2016 o 2021 is moni o ed. The eason is he esul s o he published esea ch o Slo akia, which con i med he e is a change in he composi ion o he CLI o e ime o ha he leng h o he obse ed pe iod a ec s he composi ion o he CLI. The ecommenda ion is o moni o changes in he composi ion o he CLI a leas a he i e-yea in e als, o a e majo economic changes in he coun y and he eby, o minimise he numbe o he alse signals (Tkáčo á & Kišo á, 2018). The ime se ies is ini ially seasonally adjus ed by he me hod o balancing employing he seasonal indices and hen, he end is emo ed applying he Hod ick-P esco il e (HP il e ). The HP il e is a commonly employed ool o de ending. I is a mos a ou able ex ac o o a end ha is s ochas ic bu mo es smoo hly o e ime and is unco ela ed wi h he cycle (Ko acic & Vilo ic, 2017). Fo =1,2,3… he end componen Y* is compu ed, and  is chosen o minimise: ∑(𝑌 𝑡 𝑇 𝑡=1 − 𝑌 𝑡∗)2+ λ ∑[(𝑌 𝑡+1 ∗− 𝑌 𝑡∗ 𝑇−1 𝑡=2 ) − (𝑌 𝑡∗− 𝑌 𝑡−1 ∗)]2 (1) To ge op imal esul s o de ending, i has been sugges ed o choose λ=1600 o qua e ly da a and λ =14 400 o mon hly da a (Schilch , 2005). An ad an age o he HP me hod is ha no es ic ion on he leng h o ime se ies is imposed. Ne e heless, he e is a equi emen ha be o e p oceed wi h he HP il e one should seasonally adjus ed each se ies. The end i sel is no e y in e es ing in he analysis o cyclical And ea Tkaco a, Bea a Ga u o a, Ka a ina Kelemen P edic ion o business cycle o Poland 71 beha iou . The e o e, he es o s udy was done wi h cyclical componen s o each se ies (Nilsson & B une , 2006). The c oss-co ela ion in a way o he Pea son's co ela ion coe icien wi h he wo o wa d shi s and he i e backwa d shi s is applied in o de o de e mine he ela ionship be ween he a iables. Acco ding o he alue o he co ela ion coe icien and he size o he ad ance, i is possible o c ea e g oups o cyclical and an icyclical indica o s acco ding o he pa e n o Table 3. Table 3 C i e ia o iden i ica ion o he cyclical beha iou o he indica o s o Poland Indica o ype The highes absolu e c oss- co ela ion alue Time o each he highes absolu e c oss-co ela ion alue Cyclic Ea ly > 0,55 ( +1, +2) O e due > 0,55 ( -5, -1) Concu en > 0,55 An icyclical ≤ 0,55 no signi ican Sou ce: Kľúčik, Haluška (2008). A g oup o he leading indica o s is a subjec o a mo e de ailed analysis o he compila ion o Poland's CLI. Subsequen ly, he selec ion and sco ing me hod is applied, which economic and s a is ical signi icance and s a is ical quali y a e e alua ed acco ding o. The maximum numbe o he poin s ha he a iables can each is gi en in Table 4. Table 4 Sco ing c i e ia o he selec ion o he leading cyclical indica o s Economic signi icance (maximum 10 poin s) S a is ical signi icance (maximum 30 poin s) S a is ical quali y (maximum 10 poin s) Economic in e p e a ion in ela ion o he business cycle 10 poin s Pea son's co ela ion coe icien 15 poin s Time a ailabili y 5 poin s Numbe o ad ance mon hs 15 poin s Upda e 5 poin s Sou ce: Au ho s’ esul s Due o he di e en uni s o he pa ial indica o s, hei no malised alues ob ained by using he s anda diza ion me hod (OECD, 2008) a e used in he composi ion o he CLI. A sys em o he equal and di e en weigh s is employed. The ela ionship o calcula ing equal weigh s looks like as ollows: 𝜔𝑖=1 𝑛 (2) whe e i s ands o he weigh o i h componen a n is he numbe o he pa ial indica o s en e ing he CLI. The absolu e alues o he co ela ion coe icien s a e applied in o de o de e mine he di e en weigh s. The ela ionship o calcula ion o he di e en weigh s is exp essed subsequen ly: 𝜔𝑖= 𝑟𝑖 ∑𝑟𝑖 𝑛 𝑖=1 (3) whe e i s ands o he weigh o i h componen , is he absolu e alue o he co ela ion coe icien o i h componen a he ime o ad ance and n is he numbe o he pa ial indica o s en e ing he CLI. The sum o he no malised alues mul iplied by he weigh s c ea es he basemen o cons uc ion o he CLI assembly equa ion. 𝐶𝐿𝐼𝑡= ∑𝜔𝑖 𝑛 𝑖=1 ∗ 𝑦𝑖,𝑡 (4) 𝜔 – a a iable weigh alue, y – a alue o he no malised cyclic componen o he a iable a ime, Jou nal o In e na ional S udies Vol.15, No.3, 2022 72 n – a numbe o he pa ial indica o s en e ing he CLI. 4. EMPIRICAL RESULTS AND DISCUSSION The basic s ep o he c ea ion o CLI o Poland is cha ac e ised by he selec ion o a e e ence se ies ha ep esen s he economic cycle. Th ough he analysis o he ela ionship be ween he cyclical componen o GDP and PPI, i was demons a ed ha PPI shows a mon h ad ance wi h a c oss-co ela ion alue o 0.789 o he pe iod 2005 o 2021 and 0.827 o he pe iod 2016 o 2021. This means ha he PPI ep esen s he leading indica o o GDP and hus, i is able o o m one o he componen s o he CLI. I is no app op ia e o selec i as a e e ence line. In he case o Poland, i is mo e sui able o use he cyclical componen o GDP. Selec ion o he cyclical indica o s o Poland Acco ding o he desc ibed me hodology, he cyclical ela ionship o all he 62 selec ed a iables o GDP was analysed. Th ough calcula ion o he c oss-co ela ions o he cyclical componen s associa ed wi h he a iables o he cyclical componen o GDP, he 17 indica o s we e selec ed ha demons a ed he p ope ies o he leading cyclical indica o s acco ding o he de ini ion gi en in he me hodological pa o he pape . The highes c oss-co ela ion alue was achie ed o he le side o and a he same ime, he second highes c oss-co ela ion alue was g ea e han 0.55. Table 5 demons a es he esul s. Table 5 Ad ance indica o s Indica o 2005–2021 2010–2021 2016–2021 ad ance co ela ion ad ance co ela ion ad ance co ela ion Indus ial p oduc ion index 1 M 0.798 1 M 0.802 1 M 0.827 S ock p ice index 2 M 0.524 2 M 0.533 1 M 0.664 To al indus y p oduc ion index 1 M 0.807 1 M 0.813 1 M 0.838 To al p oduc ion in he p ocessing indus y index 1 M 0.775 1 M 0.774 1 M 0.796 To al p oduc ion in he p ocessing indus y index – in e media e p oduc 1 M 0.732 1 M 0.756 1 M 0.761 To al in es men goods p oduc ion index 1 M 0.745 1 M 0.751 1 M 0.757 To al e ail olume index 1 M 0.595 1 M 0.622 1 M 0.745 P oduc ion in he p ocessing indus y 1 M 0.667 1 M 0.723 1 M 0.813 Consume indus y employmen 1 M 0.599 1 M 0.665 1 M 0.747 P ocessing indus y con idence indica o 1 M 0.714 0 M 0.786* 0 M 0.857* Cons uc ion indus y employmen 1 M 0.619 1 M 0.719 1 M 0.796 Re ail business si ua ion 1 M 0.706 1 M 0.750 1 M 0.801 Re ail employmen 1 M 0.702 1 M 0.805 1 M 0.834 O de in en ion o demand in e ail 1 M 0.708 1 M 0.760 1 M 0.811 Se ices – demand de elopmen 1 M 0.760 1 M 0.788 1 M 0.862 Se ices – employmen 1 M 0.686 1 M 0.766 1 M 0.813 Dow Jones eu o s oxx 50 P ice Index 1 M 0.483* 1 M 0.479* 1 M 0.667 * he indica o is assigned o he ad ance indica o s acco ding o he ad ance pe iod leng h and no he c oss- co ela ion alue Sou ce: Au ho s’ esul s. And ea Tkaco a, Bea a Ga u o a, Ka a ina Kelemen P edic ion o business cycle o Poland 73 Th ee ime pe iods we e moni o ed in o de o e i y he assump ion ha he e is a change in he leading cyclical indica o s h oughou he ime ha ep esen po en ial componen s o he CLI. In he case o Poland, only a small change in he na u e o hese indica o s was con i med. Ou o he 62 a iables, 17 indica o s we e included among he leading cyclical indica o s. Subsequen ly, only he 2 ou o he 17 indica o s changed hei na u e as a leading cyclical indica o . The i s one was an indica o o con idence in he manu ac u ing indus y, which o e ime changed om a leading indica o o a concu en indica o , and he second was he Dow Jones Eu o S oxx 50 p ice index ha acqui ed he cha ac e is ics o a leading indica o o e ime. Fo he 15 indica o s, i has been p o en ha hey show a be e quali y lead wi h a sho e ime pe iod, and hus he alue o hei co ela ion coe icien inc eases. O e all, i can be assumed ha in he case o Poland, he e is no signi ican change o e a ime pe iod in he g oup o he leading cyclical indica o s. Acco ding o he es ablished me hodology, i is possible o compile a high-quali y CLI he e o e, whose composi ion would mee he p edic ion o he economic cycle o Poland e en o se e al yea s. Howe e , wi h sho e ime pe iods, he alue o he c oss-co ela ion g ew, which means ha he selec ed indica o s a e sui able o c ea ing a CLI o he cu en p edic ion. Fo his eason, he subsequen in es iga ion is de o ed o he ime se ies o he 2016 o 2021 pe iod. Fo a de ailed selec ion o he a iables ha c ea e he CLI, a selec ion and a sco ing me hod is applied o all he 17 lead indica o s (Table 6), while he maximum alue, which he indica o can each, is 50 poin s (Kľúčik, 2009b). The a iables om he same economic a ea, which achie ed he highes numbe o poin s a e an applica ion o a selec ion and a sco ing me hod, we e eligible o u he analysis. This educed he selec ion down o he 10 leading cyclical indica o s. Table 6 Resul s o he selec ion and sco ing me hod o he ad ance cyclical indica o s Indica o Maximum poin s Indica o Maximum poin s To al indus y p oduc ion index 45 To al e ail olume index 40 Indus ial p oduc ion index 44 Re ail employmen 39 To al in es men goods p oduc ion index 43 O de in en ion o demand in e ail 39 S ock p ice index 42 P ocessing indus y con idence indica o employmen 39 To al p oduc ion in he p ocessing indus y index – in e media e p oduc 42 P ocessing indus y con idence indica o 38 To al p oduc ion in he p ocessing indus y index 41 Se ices – demand de elopmen 38 To al p oduc ion in he p ocessing indus y 41 Dow Jones eu o s oxx 50 P ice Index 38 Re ail business si ua ion 41 P ocessing indus y con idence indica o 25 Se ices – employmen 41 Sou ce: Au ho s’ esul s Cons uc ion o a composi e lead indica o o Poland Du ing he cons uc ion o he CLI, he e we e he 7 op ions o he composi ion o he CLI wi h each addi ional possibili y ha ing one less indica o wi h he lowes numbe o he poin s. CLI 10 (a he same weigh s) o CLI A (a di e en weigh s) we e composed o he 10 indica o s and CLI 4 o he 4 indica o s ha ep esen ed he minimum numbe . CLI nume ical designa ion is applied o he same indica o weigh s and a le e designa ion is used employed o he di e en CLI componen weigh s. Table 7 demons a es he esul s o he c oss-co ela ions wi h he ad ance olume. Jou nal o In e na ional S udies Vol.15, No.3, 2022 80 Šego a, A., Tomljano ić, M., & Huđek, I. (2017). Con empo a y app oaches o measu ing compe i i eness – he case o EU membe s a es. Jou nal o Economics and Business, 35 (1), 123-150. h ps://doi.o g/10.18045/zbe i.2017.1.123. Tkáčo á, A., & Kišo á, V. (2017). Zmeny zloženia kompozi ného p eds iho ého indiká o a Slo enska čase. Poli ická Ekonomie, 65(5), 583-600. h ps://doi.o g/10.18267/j.polek.1163. T a kina, I. (2015). Expo and GDP G ow h in Li huania: Sho - un o Middle- un Causali y? En ep eneu ship and Sus ainabili y, Issues 3(1), 74-84. h ps://doi.o g/10.9770/ jesi.2015.2.4(7). T imbu , T. M. (2006). De ending economic ime se ies: a Bayesian gene aliza ion o he Hod ick-P esco il e . Jou nal o Fo ecas ing, 25(4), 247-273. doi:10.14254/2071- 789x.2015/8-2/10. Vochozka, M., Kalino á, E., Gao, P. & Smolíko á, L. (2021). De elopmen o coppe p ice om July 1959 and p edic ed de elopmen ill he end o yea 2022. Ac a Mon anis ica Slo aca, 26(2), 262-280. h ps://doi.o g/10.46544/AMS. 26i2.07 Vochozka, M., Ho ák, J., K ulický, T. & Pa dal, P. (2020). P edic ing u u e B en oil p ice on global ma ke s. Ac a Mon anis ica Slo aca, 25(3), 375-392. h ps://doi.o g/10.46544/AMS. 25i3.10 V aná, L. (2018). On ex ending composi e leading indica o s by in e na ional economic se ies. S a is ika. 98(2). 113-13 Wachi a, E.W. (2022). Analysis o Aus ia's En ep eneu ial Ecosys em Based on he Gei App oach. In e na ional Jou nal o En ep eneu ial Knowledge, 10(1), 123-136. h ps://doi.o g/10.37335/ijek. 10i1.156 Wasiluk, A., & Gine ičius, R. (2020). P o-inno a i e mo i es o es ablishing coope a ion by en e p ises: An empi ical s udy in Poland. Economics and Sociology, 13(2), 258-278. h ps://doi.o g/10.14254/2071-789X.2020/13-2/17 Zalewski, K. (2009). Fo ecas ing Tu ning Poin s wi h Composi e Leading Indica o s - he Case o Poland. Ekonomia Jou nal, 24, 61-9. And ea Tkaco a, Bea a Ga u o a, Ka a ina Kelemen P edic ion o business cycle o Poland 81 ANNEX Figu e 1. De elopmen o he cyclical componen o GDP and CLI wi h he equal and di e en weigh s Sou ce: Au ho s’ esul s Figu e 2. Compa ison o he de elopmen o he cyclical componen o GDP, CLI 5 ( he equal weigh s), CLI OECD, ESI Sou ce: Au ho s’ esul s -8,00 -6,00 -4,00 -2,00 0,00 2,00 4,00 Jan-2016 Ma -2016 May-2016 Jul-2016 Sep-2016 No -2016 Jan-2017 Ma -2017 May-2017 Jul-2017 Sep-2017 No -2017 Jan-2018 Ma -2018 May-2018 Jul-2018 Sep-2018 No -2018 Jan-2019 Ma -2019 May-2019 Jul-2019 Sep-2019 No -2019 Jan-2020 Ma -2020 May-2020 Jul-2020 Sep-2020 No -2020 Jan-2021 Ma -2021 May-2021 Jul-2021 Sep-2021 No -2021 Cyclical componen o GDP CLI 5 CLI F -5,00 -4,00 -3,00 -2,00 -1,00 0,00 1,00 2,00 -8,00 -6,00 -4,00 -2,00 0,00 2,00 4,00 Jan-2016 Ma -2016 May-2016 Jul-2016 Sep-2016 No -2016 Jan-2017 Ma -2017 May-2017 Jul-2017 Sep-2017 No -2017 Jan-2018 Ma -2018 May-2018 Jul-2018 Sep-2018 No -2018 Jan-2019 Ma -2019 May-2019 Jul-2019 Sep-2019 No -2019 Jan-2020 Ma -2020 May-2020 Jul-2020 Sep-2020 No -2020 Jan-2021 Ma -2021 May-2021 Jul-2021 Sep-2021 No -2021 cyclical componen o GDP CLI OECD ESI CLI 5