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

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Author Info
Jonas Dovern
Christina Ziegler

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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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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
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Handle: RePEc:kie:kieliw:1397

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Related research
Keywords: leading indicators; forecasting; recessions;

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Find related papers by JEL classification:
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
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

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