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Predicting Growth Rates and Recessions. Assessing U.S. Leading Indicators Under Real-Time Conditions

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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 turning points of the economy. 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 the results for four-quarter-ahead growth forecasts and the prediction of recession probabilities in general are 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

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1397.

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Length: 25 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:kie:kieliw:1397

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Keywords: leading indicators; forecasting; recessions;

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Cited by:
  1. Fabio Fornari & Wolfgang Lemke, 2010. "Predicting recession probabilities with financial variables over multiple horizons," Working Paper Series 1255, European Central Bank.
  2. 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.
  3. 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 info:hdl:10419/32955, Kiel Institute for the World Economy.

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