Page 152 - Contributed Paper Session (CPS) - Volume 8

CPS2223 Siti Nuraini R. et al.

Malaysian Economic Indicator: How well does it
provide signal on economic crisis?
Siti Nuraini Rusli, Nur Hidaah Mahamad Rappek
Department of Statistics Malaysia

Abstract
The ability to predict the future economic situation especially slowdown is an
advantage as it could give early signals and thus, measures could be taken to
mitigate the effects to the nation. Malaysia has experienced economic
recessions with the latest occurred in 2008. Malaysian Economic Indicator
consisting Leading, Coincident and Lagging Indexes are used to monitor the
Malaysia’s near-term economic direction on a monthly basis. It is useful in
assisting the policy makers, investors, researchers and the public. As such, it is
important to demonstrate the capability of the existing indicators in providing
reliable direction especially in economic crisis for decision makers. In other
words, could the indicators provide signals in real-time? The paper answers
the question using the Three D’s Method by the Conference Board.

Keywords
Leading Economic Index; Business Cycle; Three D’s Method

1. Introduction
Malaysian Economic Indicator consisting Leading, Coincident and Lagging
Indexes are used to monitor the Malaysia’s near-term economic direction on
a monthly basis. It is useful in assisting the policy makers, investors,
researchers and the public. As such, it is important to demonstrate the
capability of the existing indicators in providing reliable direction especially in
economic crisis for decision makers.
Coincident indicators (CI) which comprises of employment, income,
production, capital utilisation and retail trade, comprehensively measure the
overall current economic performance. Hence, they define the business cycle.
Leading indicators (LI) consists of money supply, industrial index, imports,
housing permits, sales value and new companies registered, consistently lead
the CI. In other words, the series tend to shift the direction in advance of the
business cycle. On the other hand, the Lagging indicators (LG) validate the
signal given by LI and CI specially to confirm the turning points (peaks and
troughs) of the LI and CI.
Based on the LI historical data, the signal provides reached 80.0 per cent
of accuracy with the short-term signal between four to six months in advance

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