A composite leading indicator for a small transition economy: the case of Croatia

This paper provides an overview of application of a modified NBER “leading indicators approach” in Croatia since the mid 1990s. Shortness of time series, which has proven to be the biggest obstacle in applying the original NBER method, was overcome by a modification of a methodological step in the scoring procedure. The main idea behind the first part of the paper is to briefly explain the NBER methodology, with causes of modifications and interventions in the method when it started being applied in Croatia. Then follows an informative outline of the last revision of the CROLEI index from 2004 with the purpose to update the prognostic system and improve the index’s prognostic power. The last part of the paper analyses the movement of the CROLEI index and its prognostic strength with respect to the previous revisions and offers several conclusions.