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The OECD CLI system is based on the "growth cycle" approach, where business cycles and turning points are measured and identified in the deviation-from-trend series. The Gross Domestic Product (GDP) is used as the reference for identification of turning points in the growth cycle for all countries, except for China for which the OECD relies on the value added of industry at 1995 prices.
Zones aggregates of the CLIs and the reference series are calculated as weighted averages of the corresponding zone member series.
The turning point detection algorithm is a simplified version of the original Bry and Boschan routine. (The routine parses local minima and maxima in the cycle series and applies censor rules to guarantee alternating peaks and troughs, as well as phase and cycle length constraints. The Bry and Boschan routine used by the OECD does not include the correction for outlier, as is the case in the original version, as such a correction is implanted at an earlier stage of the filtering process).
The components of the CLI are time series which exhibit leading relationship with the reference series (GDP) at turning points. Country CLIs are compiled by combining de-trended smoothed and normalized components. The component series for each country are selected based on various criteria such as economic significance; cyclical behaviour; data quality; timeliness and availability.
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