An Ahp-Based Composite Cyclical-Performance Index

Traditional-NBER methods for compiling a diverse basket of cyclical-economic indicators into a summary composite measure changed very little over the last fifty years. Although improvements to factor standardisation and trend calculations have been implemented by practitioners, the basic concept remains unaltered or "traditional". On the other hand, newer statistical techniques for spotting cyclical turning points have been advocated as superior to the traditional-NBER method, if the user is willing to assume a certain underlying model structure in lieu of the eclectic and simple structure of a composite index. A middle ground exists that retains the simplicity and flexibility of the traditional-NBER indicator method, but extends the current cyclical-indicator methodology using an Analytical Hierarchy Process (AHP) for time-variant component weighting. This paper demonstrates the value of an AHP-based composite indicator