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Real-Time Tests of the Leading Economic Index: Do Changes in the Index Composition Matter?

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Author Info

  • Robert H. McGuckin

    (The Conference Board)

  • Ataman Ozyildirim

    ()
    (The Conference Board)

Abstract

This paper reports real-time out-of-sample tests of the ability of the U.S. Index Leading Economic Indicators (LEI) to forecast the economy using "composition-changing" "as-published" versions of the LEI. It is an extension of recent work that focused on forecasts with a "composition-constant" LEI. The results demonstrate that the LEI helps forecasts and compositional change in the LEI does not account for poor real-time out-of-sample forecast performance found in earlier work. Reviews of the historical record reinforce the findings.

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File URL: http://www.conference-board.org/economics/workingpapers.cfm?pdf=E-0012-03-WP
File Function: First version, 2003
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Bibliographic Info

Paper provided by The Conference Board, Economics Program in its series Economics Program Working Papers with number 03-04.

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Length: 32 pages
Date of creation: Jun 2003
Date of revision:
Publication status: Published in Journal of Business Cycle Measurement and Analysis, Vol. 1, No. 2, June 2004, pages 171-92.
Handle: RePEc:cnf:wpaper:0304

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Related research

Keywords: Business cycle; Indicators; Leading index; Times series; Forecasting;

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References

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  1. Francis X. Diebold & Glenn D. Rudebusch, 1989. "Forecasting output with the composite leading index: an ex ante analysis," Finance and Economics Discussion Series 90, Board of Governors of the Federal Reserve System (U.S.).
  2. Wesley C. Mitchell & Solomon Fabricant, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1, May.
  3. Maximo Camacho & Gabriel Perez-Quiros, 2000. "This Is What The Leading Indicators Lead," Computing in Economics and Finance 2000 132, Society for Computational Economics.
  4. McGuckin, Robert H. & Ozyildirim, Ataman & Zarnowitz, Victor, 2007. "A More Timely and Useful Index of Leading Indicators," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 110-120, January.
  5. Hamilton, James D & Perez-Quiros, Gabriel, 1996. "What Do the Leading Indicators Lead?," The Journal of Business, University of Chicago Press, vol. 69(1), pages 27-49, January.
  6. Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901.
  7. Geoffrey H. Moore, 1950. "Statistical Indicators of Cyclical Revivals and Recessions," NBER Books, National Bureau of Economic Research, Inc, number moor50-1, May.
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Cited by:
  1. Rua, Antonio & Nunes, Luis C., 2005. "Coincident and leading indicators for the euro area: A frequency band approach," International Journal of Forecasting, Elsevier, vol. 21(3), pages 503-523.
  2. Loría, Eduardo & Brito, L., 2004. "Is the Consumer Confidence Index a Sound Predictor of the Private Demand in the United States?," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 22, pages 1-15, Diciembre.

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