Methods Of Determining CI Weighting And The Application In Inflation

Business cycle is all around the world, the precise prediction of business cycle will absolutely reduce many negative influences. The Great Depression of America between 1929 and 1931 is the most serious economic depression, which had a large and deep unpredictable impact. Before 16 century, scientists have began the research of business cycle, and accomplished a great success.It can be said that America should be the pioneer of business cycle, all kinds of business cycle's research methods developed by NBER have been used all over the world. These methods include Diffusion Index analysis method,Composite Index analysis method and Spectral analysis method. et. China begin business cycle research since middle 1980s. The specialist and researchers learn from the theory of America, they did some empirical analysis using Chinese data, and through several decades'research, the theory in China has been improved and innovated, which makes the prediction of business cycle more and more accurate. On the basis of NBER's Composite Index,this text dose a small part of research-the weighting in CI.So long, CI is necessary to do business cycle research, in the progress of the construction of CI, the weighting is critical. Some specialists and researchers usually use Scoring System of NBER to weighting, and then, because the weighing of this method is similar to one, so presently many specialists and researchers will directly give each indicator one weighting. But is it reasonable to give the same weighting one? We will choose the other two methods-Analytic Hierarchy Process(AHP) and Factor analysis to weighting for each indicator. Through comparison of CI which is calculated by three different methods, the text wish to offer a better method for the research of business cycle. And another part of the text is about the research of inflation, in this part, CPI is used to be the benchmark of inflation, and then we chose several leading indicators of CPI. Also we compared the CI of inflation which calculated through three different weighting methods.The innovation of the text are as follows:use AHP method determine the weighting of CI, compare the weighting with Factor analysis and Scoring system methods and then calculate different CIs. AHP method reflects the application of math in business cycle, in the past, we are inclined to give a weighting for each indicator subjectively, which lacks some rigor. But AHP method combined qualitative and quantitative analysis, subjective and objective analysis, abstract and specific analysis to determine the weighting of each indicator. This improved reliability of the weighting. Apart from these, the paper offered an application of three different weighting methods both in business cycle and inflation.The inadequacy of this paper are as follows:firstly, although I try my best to read the widest range of domestic and foreign research results, it is difficult to grasp relative knowledge completely and systematically because of the knowledge of myself, especially in the aspect of AHP, this method in the application of CI's weighting is not broad, so the research of this text is just an investigation, it still needs to be improved to better predict business cycle and inflation. Secondly, there are so many macro-indicators, and the indicators I collect may not be comprehensive, so the restriction of indicators will absolutely has a negative effect to the empirical analysis.