Business Cycle and Early Warning Indicators for the Economy of Hong Kong– Challenges of Forecasting Work amid the COVID-19 Pandemic

Abstract This paper discusses the use of the OECD’s framework to identify early warning indicators for building a Composite Leading Indicator (CLI) and the use of the Vector Autoregressive Model (VAR) for constructing a short-term forecasting model of economic growth of Hong Kong. With the onset of the COVID-19 pandemic, this paper further evaluates the performance of the CLI and forecasting model which were built based on pre-COVID-19 parameters and identify further adjustments to enhance the model performance.