Leading Indicators: What Have We Learned?
AbstractWe provide a summary updated guide for the construction, use and evaluation of leading indicators, and an assessment of the most relevant recent developments in this field of economic forecasting. To begin with, we analyze the problem of selecting a target coincident variable for the leading indicators, which requires coincident indicator selection, construction of composite coincident indexes, choice of filtering methods, and business cycle dating procedures to transform the continous target into a binary expansion/recession indicator. Next, we deal with criteria for choosing good leading indicators, and simple non-model based methods to combine them into composite indexes. Then, we examine models and methods to transform the leading indicators into forecasts of the target variable. Finally, we consider the evaluation of the resulting leading indicator based forecasts, and review the recent literature on the forecasting performance of leading indicators.
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Bibliographic InfoPaper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 286.
Date of creation: 2005
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Other versions of this item:
- Marcellino, Massimiliano, 2005. "Leading Indicators: What Have We Learned?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4977, C.E.P.R. Discussion Papers.
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-03-20 (All new papers)
- NEP-BEC-2005-03-20 (Business Economics)
- NEP-ECM-2005-03-20 (Econometrics)
- NEP-MAC-2005-03-20 (Macroeconomics)
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