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What Do the Leading Indicators Lead?

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Author Info
Hamilton, James D
Perez-Quiros, Gabriel

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Abstract

The authors find that the composite leading index (CLI) is useful for forecasting gross national product (GNP), both in sample and in an out-of-sample real-time exercise. They propose a nonlinear specification in which cyclical shifts of the CLI precede those in GNP. However, the authors find that better forecasts are provided by a simple linear relation between current GNP growth and the growth rate of the CLI during the previous quarter along with an error-correction term corresponding to the previous quarter's logarithmic difference between the level of the CLI and the level of GNP. Copyright 1996 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 69 (1996)
Issue (Month): 1 (January)
Pages: 27-49
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Handle: RePEc:ucp:jnlbus:v:69:y:1996:i:1:p:27-49

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  1. Benoit Bellone, 2004. "Une lecture probabiliste du cycle d’affaires américain," Econometrics 0407002, EconWPA, revised 28 Mar 2005. [Downloadable!]
  2. Maximo Camacho & Gabriel Perez-Quiros, 2002. "This is what the leading indicators lead," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(1), pages 61-80. [Downloadable!]
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  3. Zhiwei Zhang, 2002. "Corporate Bond Spreads and the Business Cycle," Working Papers 02-15, Bank of Canada. [Downloadable!]
  4. Gert Peersam & Frank Smets, 2002. "The industry effects of monetary policy in the Euro area," Working Paper Series 165, European Central Bank. [Downloadable!]
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  5. Giampiero M. Gallo & Massimiliano Marcellino, . "Ex Post and Ex Ante Analysis of Provisional Data," Working Papers 141, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
  6. Cubadda, Gianluca, 2004. "A Reduced Rank Regression Approach to Coincident and Leading Indexes Building," Economics & Statistics Discussion Papers esdp04022, University of Molise, Dept. SEGeS. [Downloadable!]
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  7. John C. Robertson & Ellis W. Tallman, 1998. "Data vintages and measuring forecast model performance," Economic Review, Federal Reserve Bank of Atlanta, issue Q 4, pages 4-20. [Downloadable!]
  8. Francis X. Diebold & Glenn D. Rudebusch, 2001. "Five questions about business cycles," Economic Review, Federal Reserve Bank of San Francisco, pages 1-15. [Downloadable!]
  9. Maximo Camacho & Gabriel Perez-Quiros, 2000. "This is what the US leading indicators lead," Working Paper Series 27, European Central Bank. [Downloadable!]
  10. Valentina Corradi & Andres Fernandez & Norman Swanson, 2008. "Information in the revision process of real-time datasets," Working Papers 08-27, Federal Reserve Bank of Philadelphia. [Downloadable!]
  11. Kathleen Dorsainvil, 2006. "Explaining Economic Performance in the Haitian Economy," Economia Mexicana NUEVA EPOCA, , vol. 0(1), pages 125-145, January-J. [Downloadable!]
  12. Shyh-Wei Chen, 2006. "Enhanced reliability of the leading indicator in identifying turning points in Taiwan? an evaluation," Economics Bulletin, Economics Bulletin, vol. 5(10), pages 1-17. [Downloadable!]
  13. R. Paap & H.K. van Dijk, 2002. "Bayes estimates of Markov trends in possibly cointegrated series," Econometric Institute Report 295, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
  14. Annabelle Mourougane & Moreno Roma, 2002. "Can confidence indicators be useful to predict short term real GDP growth?," Working Paper Series 133, European Central Bank. [Downloadable!]
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  15. Denise R. Osborn & Paul W. Simpson, 2000. "Forecasting UK Industrial Production Over the Business Cycle," Econometric Society World Congress 2000 Contributed Papers 1059, Econometric Society. [Downloadable!]
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  16. Robert H. McGuckin & Ataman Ozyildirim, 2003. "Real-Time Tests of the Leading Economic Index: Do Changes in the Index Composition Matter?," Economics Program Working Papers 03-04, The Conference Board, Economics Program. [Downloadable!]
  17. Margaret M. McConnell & Gabriel Perez-Quiros, 2000. "Output Fluctuations in the United States: What Has Changed since the Early 1980's?," American Economic Review, American Economic Association, vol. 90(5), pages 1464-1476, December. [Downloadable!] (restricted)
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  18. Harm Bandholz & Michael Funke, 2001. "In Search of Leading Indicators of Economic Activity in Germany," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  19. Clive W.J. Granger & Yongil Jeon, 1997. "Measuring Lag Structure in Forecasting Models - the Introduction of Time Distance," University of California at San Diego, Economics Working Paper Series 97-24, Department of Economics, UC San Diego. [Downloadable!]
  20. E. Andersson & D. Bock & M. Frisén, 2006. "Some statistical aspects of methods for detection of turning points in business cycles," Journal of Applied Statistics, Taylor and Francis Journals, vol. 33(3), pages 257-278, April. [Downloadable!] (restricted)
  21. Koskinen, Lasse & Öller, Lars-Erik, 2001. "A Classifying Procedure for Signaling Turning Points," Working Paper Series in Economics and Finance 427, Stockholm School of Economics. [Downloadable!]
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  22. Benoit Bellone & David Saint-Martin, 2004. "Detecting Turning Points with Many Predictors through Hidden Markov Models," Econometrics 0407001, EconWPA. [Downloadable!]
  23. Frank Smets & Gert Peersman, 2001. "Are the effects of monetary policy in the euro area greater in recessions than in booms?," Working Paper Series 052, European Central Bank. [Downloadable!]
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