Leading economic activity indicator models for Peru

This article examines the improvement of leading indicators for predicting economic activity in Peru, using the methods of Auerbach and The Conference Board. The aim is to increase the effectiveness of these indicators in identifying turning points and forecasting the economic cycle for the period 1992–2002, taking into account the country’s economic context. The methodology includes econometric analyses that link output series, fiscal variables, and interest rates, among others. Particularly, a composite leading index is proposed that integrates economically significant variables, adjusted to improve its predictive power. The results show that the Auerbach leading index provides reliable two-month-ahead forecasts of GDP, while The Conference Board’s model is able to identify economic expansions earlier. The implications of these findings suggest that the effective use of these indicators can better inform economic policy decisions, particularly in the calibration of monetary policy in response to economic fluctuations. (Abstract and audio: Department of Economic Publications)