Real-time macroeconomic forecasting with leading indicators: An empirical comparison
This paper demonstrates that the Conference Board’s Composite Leading Index (CLI) has significant real-time predictive ability for Industrial Production (IP) growth rates at horizons from one to six months ahead over the period 1989–2009. A popular but unrealistic analysis, which combines real-time data for CLI and final vintage data for IP as predictor variables, obscures the actual predictive content of the CLI, in the sense that in that case, the improvements in forecast accuracy relative to a univariate AR model are not significant. The CLI appears to be less useful for forecasting growth rates of the Conference Board’s Composite Coincident Index (CCI) in real time, as a univariate AR model performs better. This result is mostly due to its disappointing performance during the first five years of the forecast period. The CLI may not be the best way of exploiting the information contained in the underlying individual leading indicator variables. The use of principal components instead of CLI leads to more accurate real-time forecasts for both IP and CCI growth rates.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 27 (2011)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/ijforecast|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ataman Ozyildirim & Brian Schaitkin & Victor Zarnowitz, 2008.
"Business Cycles in the Euro Area Defined with Coincident Economic Indicators and Predicted with Leading Economic Indicators,"
Economics Program Working Papers
08-04, The Conference Board, Economics Program.
- Ataman Ozyildirim & Brian Schaitkin & Victor Zarnowitz, 2010. "Business cycles in the euro area defined with coincident economic indicators and predicted with leading economic indicators," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 6-28.
- Aruoba, Boragan, 2005.
"Data Revisions Are Not Well-Behaved,"
CEPR Discussion Papers
5271, C.E.P.R. Discussion Papers.
- Dean Croushore & Tom Stark, 1999.
"A real-time data set for macroeconomists,"
99-4, Federal Reserve Bank of Philadelphia.
- Pesaran, M Hashem & Timmermann, Allan G, 2004.
"Real Time Econometrics,"
CEPR Discussion Papers
4402, C.E.P.R. Discussion Papers.
- Pesaran, M. Hashem & Timmermann, Allan, 2004. "Real Time Econometrics," IZA Discussion Papers 1108, Institute for the Study of Labor (IZA).
- M. Hashem Pesaran & Allan Timmermann, 2004. "Real Time Econometrics," CESifo Working Paper Series 1169, CESifo Group Munich.
- Pesaran, M.H. & Timmermann, A., 2004. "‘Real Time Econometrics’," Cambridge Working Papers in Economics 0432, Faculty of Economics, University of Cambridge.
- Diebold, Francis X & Mariano, Roberto S, 2002.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 20(1), pages 134-144, January.
- Stock, James H. & Watson, Mark W., 1999.
Journal of Monetary Economics,
Elsevier, vol. 44(2), pages 293-335, October.
- 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.
- Swanson, N.R. & van Dijk, D.J.C., 2001.
"Are statistical reporting agencies getting it right? Data rationality and business cycle asymmetry,"
Econometric Institute Research Papers
EI 2001-28, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Swanson, Norman R. & van Dijk, Dick, 2006. "Are Statistical Reporting Agencies Getting It Right? Data Rationality and Business Cycle Asymmetry," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 24-42, January.
- Tom Stark and Dean Croushore, 2001.
"Forecasting with a Real-Time Data Set for Macroeconomists,"
Computing in Economics and Finance 2001
258, Society for Computational Economics.
- Stark, Tom & Croushore, Dean, 2002. "Forecasting with a real-time data set for macroeconomists," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 507-531, December.
- Tom Stark & Dean Croushore, 2001. "Forecasting with a real-time data set for macroeconomists," Working Papers 01-10, Federal Reserve Bank of Philadelphia.
- Anindya BANERJEE & Massimiliano MARCELLINO, 2002.
"Are There Any Reliable Leading Indicators for US Inflation and GDP Growth?,"
Economics Working Papers
ECO2002/21, European University Institute.
- Banerjee, Anindya & Marcellino, Massimiliano, 2006. "Are there any reliable leading indicators for US inflation and GDP growth?," International Journal of Forecasting, Elsevier, vol. 22(1), pages 137-151.
- Anindya Banerjee & Massimiliano Marcellino, 2003. "Are There Any Reliable Leading Indicators for U.S. Inflation and GDP Growth?," Working Papers 236, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Stock, James H. & Watson, Mark W., 2006. "Forecasting with Many Predictors," Handbook of Economic Forecasting, Elsevier.
- Todd E. Clark & Michael W. McCracken, 2007.
"Tests of equal predictive ability with real-time data,"
Research Working Paper
RWP 07-06, Federal Reserve Bank of Kansas City.
- Clark, Todd E. & McCracken, Michael W., 2009. "Tests of Equal Predictive Ability With Real-Time Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 441-454.
- Todd E. Clark & Michael W. McCracken, 2008. "Tests of equal predictive ability with real-time data," Working Papers 2008-029, Federal Reserve Bank of St. Louis.
- Croushore, Dean, 2006. "Forecasting with Real-Time Macroeconomic Data," Handbook of Economic Forecasting, Elsevier.
- Swanson Norman, 1996.
"Forecasting Using First-Available Versus Fully Revised Economic Time-Series Data,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 1(1), pages 1-20, April.
- Swanson, N.R., 1996. "Forecasting Using First Available Versus Fully Revised Economic Time Series data," Papers 4-96-7, Pennsylvania State - Department of Economics.
- 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.
- Dean Croushore, 2011.
"Frontiers of Real-Time Data Analysis,"
Journal of Economic Literature,
American Economic Association, vol. 49(1), pages 72-100, March.
- Robert H. McGuckin & Ataman Ozyildirim & Victor Zarnowitz, 2003.
"A More Timely and Useful Index of Leading Indicators,"
Economics Program Working Papers
03-01, The Conference Board, Economics Program.
- 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.
- Whitney K. Newey & Kenneth D. West, 1986.
"A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix,"
NBER Technical Working Papers
0055, National Bureau of Economic Research, Inc.
- Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-708, May.
- Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Marcellino, Massimiliano, 2006. "Leading Indicators," Handbook of Economic Forecasting, Elsevier.
- Golinelli, Roberto & Parigi, Giuseppe, 2008. "Real-time squared: A real-time data set for real-time GDP forecasting," International Journal of Forecasting, Elsevier, vol. 24(3), pages 368-385.
- Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-162, April.
- Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
When requesting a correction, please mention this item's handle: RePEc:eee:intfor:v:27:y:2011:i:2:p:466-481. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.