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Predicting Growth Rates and Recessions. Assessing U.S. Leading Indicators under Real-Time Condition

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  • Jonas Dovern
  • Christina Ziegler

Abstract

In this paper we analyze the power of various indicators to predict growth rates of aggregate production using real-time data. In addition, we assess their ability to predict recessions. We consider four groups of indicators: survey data, composite indicators, real economic indicators, and financial data. Almost all indicators are found to improve short-run growth forecasts whereas results for four quarter ahead growth forecasts and the prediction of recession probabilities in general is mixed. We can confirm the result that an indicator suited to improve growth forecasts does not necessarily help to produce more accurate recession forecasts. Only composite leading indicators perform generally well in both forecasting exercises.

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Bibliographic Info

Article provided by Duncker & Humblot, Berlin in its journal Applied Economics Quarterly.

Volume (Year): 54 (2008)
Issue (Month): 4 ()
Pages: 293-318

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Handle: RePEc:aeq:aeqaeq:v54_y2008_i4_q4_p293-318

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Keywords: leading indicators; forecasting; recessions;

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References

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Cited by:
  1. Boysen-Hogrefe, Jens & Dovern, Jonas & Gern, Klaus-Jürgen & Jannsen, Nils & van Roye, Björn & Scheide, Joachim, 2010. "Erholung der Weltkonjunktur ohne große Dynamik," Open Access Publications from Kiel Institute for the World Economy 32955, Kiel Institute for the World Economy (IfW).
  2. Fornari, Fabio & Lemke, Wolfgang, 2010. "Predicting recession probabilities with financial variables over multiple horizons," Working Paper Series 1255, European Central Bank.
  3. Christina Ziegler, 2009. "Testing Predicitive Ability of Business Cycle Indicators for the Euro Area," Ifo Working Paper Series Ifo Working Paper No. 69, Ifo Institute for Economic Research at the University of Munich.

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