Financial Institutions Association Economic Outlook Index as a Leading Indicator of Real Economic Activity: A Time Series Analysis for Türkiye

Abstract

This study tests whether the Economic Outlook Index (FKB-EGE) published by the Financial Institutions Association (FKB) serves as a leading indicator for real economic activity in Türkiye using time series analysis methods. The FKB-EGE index, which is based on actual transaction data from factoring, financial leasing, and financing companies, differs from survey-based indicators in that it is constructed using data directly linked to real economic activity. In this study, the Industrial Production Index (IPI) published by the Turkish Statistical Institute (Turkstat) was used as an indicator of real economic activity. The analysis includes a time series of 124 periods covering monthly data from February 2015, when the FKB-EGE was first calculated, to May 2025. The findings obtained from the Granger causality tests and forecasting regression models applied indicate that FKB-EGE, and particularly the Financial Leasing sub-index, provide statistically significant and economically important information in forecasting the future trend of the IPI. The superior performance of the Financial Leasing Index in medium-term (3–6 months) forecasts aligns with theoretical expectations that leasing activities, which reflect investment decisions, serve as an important early warning signal for future production activity. These results suggest that the FKB-EGE could serve as a valuable real-time monitoring tool for policymakers and market analysts.

Keywords

• Leading Indicators
• FKB Economic Outlook Index
• Industrial Production Index
• Time Series Analysis
• Granger Causality

References

1. Acharya, V. V., & Richardson, M. P. (2009). Restoring financial stability: how to repair a failed system. John Wiley & Sons. google scholar
2. Altuğ, S., & Uluceviz E. (2011). Leading indicators of real activity and inflation for Türkiye, 2001-2010. Koç University-TUSIAD Economic Research Forum Working Paper Series (No. 1111). google scholar
3. Aramonte, S., Schrimpf, A., & Shin, H. S. (2022). Non-bank financial intermediaries and financial stability. BIS Working Paper No. 972. Bank for International Settlements. google scholar
4. Arslan, Y., Atabek, A., Hülagü, T., & Şahinöz, S. (2015) Expectation errors, uncertainty, and economic activity. (TCMB Working Paper No. 1117). Central Bank of the Republic of Türkiye google scholar
5. Atabek, A., Cosar, E. E., & Sahinöz, S. (2005). A new composite leading indicator of for Turkish economic activity. Emerging Markets Finance and Trade, 41(1), 45-64. [https://doi.org/10.1080/1540496X.2005.11052597google](https://doi.org/10.1080/1540496X.2005.11052597google) scholar
6. Bernanke, B. S. (1983). Nonmonetary effects of the financial crisis in the propagation of the Great Depression. American Economic Review, 73(3), 257–276. [suspicious link removed] google scholar
7. Bernanke, B. S., & Gertler, M. (1989). Agency costs, net worth, and business fluctuations. American Economic Review, 79(1), 14–31. [suspicious link removed] google scholar
8. Bernanke, B. S., Gertler, M., & Gilchrist, S. (1994). The financial accelerator and the flight to quality (NBER Working Paper No. 4789). National Bureau of Economic Research. [https://doi.org/10.3386/w4789google](https://doi.org/10.3386/w4789google) scholar

9. Bernanke, B. S., Gertler, M., & Gilchrist, S. (1999). The financial accelerator in a quantitative business cycle framework. In J. B. Taylor & M. Woodford (Eds.), Handbook of Macroeconomics (Vol. 1, Part C, pp. 1341–1393). Elsevier. [https://doi.org/10.1016/S1574-0048(99)10034-X](https://doi.org/10.1016/S1574-0048\(99\)10034-X) google scholar
10. Canöz, İ. (2018). The causality relationship between Istanbul Stock Exchange 100 index and consumer confidence index: The case of Turkey. Fiscaoeconomia, 2(1), 136-153. [https://doi.org/10.25295/fsecon.366622](https://doi.org/10.25295/fsecon.366622) google scholar
11. Camlica, F., Gunes, D., & Ozen, E. (2017). A financial connectedness analysis for Turkey. (TCMB Working Paper 1719). Research and Monetary Policy Department, Central Bank of the Republic of Turkey.google scholar
12. Ćorić, B. (2011). The financial accelerator effect: concept and challenges. Financial Theory and Practice, 35(2), 171-196. google scholar
13. Financial Stability Board. (2022). Global Monitoring Report on Non-Bank Financial Intermediation 2022. FSB. [https://www.fsb.org/2022/12/global-monitoring-report-on-non-bank-financial-intermediation-2022/google](https://www.fsb.org/2022/12/global-monitoring-report-on-non-bank-financial-intermediation-2022/google) scholar
14. FKB. (2024). FKB Economic Outlook Index. Financial Institutions Association. [https://www.fkb.org.tr/](https://www.fkb.org.tr/) google scholar
15. Foroni, C., Gelain, P., & Marcellino, M. (2022). The financial accelerator mechanism: Does frequency matter? (ECB Working Paper No. 2637). European Central Bank. [https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2637\~e8ac25af28.en.pdf](https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2637~e8ac25af28.en.pdf) google scholar
16. Gallegati, M. (2014). Making leading indicators more leading: A wavelet-based method for the construction of composite leading indexes. OECD Journal: Journal of Business Cycle Measurement and Analysis, 2014(1), 1-21. [https://doi.org/10.1787/jbcma-2014-5jxx56gqmhf1.google](https://doi.org/10.1787/jbcma-2014-5jxx56gqmhf1.google) scholar
17. Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), 424–438. [https://doi.org/10.2307/1912791](https://doi.org/10.2307/1912791) google scholar
18. Gyomai, G., & Wildi, M. (2012). OECD composite leading indicators for G7 countries: A comparison of the Hodrick-Prescott filter and the multivariate direct filter approach (OECD Statistics Working Papers, No. 2012/05). OECD Publishing. [https://doi.org/10.1787/5k4dhnzw8xr](https://doi.org/10.1787/5k4dhnzw8xr) google scholar
19. Holmstrom, B., Tirole, J. (1997). Financial Intermediation, Loanable Funds, and the Real Sector. The Quarterly Journal of Economics, 112(3), 663–691. [https://doi.org/10.1162/003355397555316](https://doi.org/10.1162/003355397555316) google scholar
20. Klapper, L. (2006). The Role of Factoring for Financing Small and Medium Enterprises. Journal of Banking & Finance, 30(11), 3111-3130. [https://doi.org/10.1016/j.jbankfin.2006.05.001](https://doi.org/10.1016/j.jbankfin.2006.05.001) google scholar
21. Kraemer-Eis, H., & Lang, F. (2012). The importance of leasing for SME finance (No. 2012/15). EIF Working Paper. google scholar
22. Leigh, D., Rossi, M. (2002). Leading indicators of growth and inflation in Türkiye (IMF Working Paper No. 02/231). International Monetary Fund. [https://www.imf.org/external/pubs/ft/wp/2002/wp02231.pdf](https://www.imf.org/external/pubs/ft/wp/2002/wp02231.pdf) google scholar
23. Mitchell, W. C., & Burns, A. F. (1938). Statistical indicators of cyclical revivals (Bulletin 69). National Bureau of Economic Research. [http://www.nber.org/chapters/c4251](http://www.nber.org/chapters/c4251) google scholar
24. Moore, G. H. (Ed.). (1961). Business cycle indicators. Princeton University Press for NBER. google scholar
25. Özbilgin, H. M. (2017). Forecasting the growth cycles of the Turkish economy (TCMB Working Paper No. 17/15). Central Bank of the Republic of Türkiye. [https://www.tcmb.gov.tr/wps/wcm/connect/d2ffb048-bdb5-4ae0-9e61-1b02dfd1cc97/wp1715.pdf?mod=ajperes](https://www.tcmb.gov.tr/wps/wcm/connect/d2ffb048-bdb5-4ae0-9e61-1b02dfd1cc97/wp1715.pdf?mod=ajperes) google scholar
26. Sırma, İ. Ş., Murat, Saldanlı, A., Bektaş, H., Bozoklu, Ş., Şişmanoğlu, E., & Uzun, S. (2025). Financial Institutions Association Economic Outlook Index Bulletin. Financial Institutions Association. google scholar
27. Stiglitz, J. E., & Weiss, A. (1981). Credit Rationing in Markets with Imperfect Information. American Economic Review, 71(3), 393–410. [suspicious link removed] google scholar
28. Stock, J. H., Watson, M. W. (2003). Forecasting output and inflation: The role of asset prices. Journal of Economic Literature, 41(3), 788-829. [https://doi.org/10.1257/002205103322436197](https://doi.org/10.1257/002205103322436197) google scholar
29. Zarnowitz, V. (1992). Business cycles: Theory, history, indicators, and forecasting. University of Chicago Press. google scholar