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"Whither New England"?


  • Stephen K. McNees
  • Geoffrey M. B. Tootell


This article attempts to identify precursors, or indicators, of New England employment. The predictive power of a diverse array of variables is calculated and compared. However, because no single variable is likely to contain all information of predictive value, the article then explores alternative methods of combining several variables into an index or statistical "model" of New England employment growth. The variables are separated into regional, national, and expectational in order to measure the predictive value of each type of information. ; In both in-sample and out-of-sample tests, a model that included all categories of variables was the most successful. However, relative to its in-sample fit, every model performed poorly out of sample. The reason for this breakdown is clear--the models were fit during the "Massachusetts Miracle" while their predictive power was tested over the New England bust. The lack of a theoretical model and deficiencies in the available data make a purely statistical approach to predicting the New England economy suspect. Some insights can be gained, however, by surveying the New England economy in a broader historical context.

Suggested Citation

  • Stephen K. McNees & Geoffrey M. B. Tootell, 1991. ""Whither New England"?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 11-26.
  • Handle: RePEc:fip:fedbne:y:1991:i:jul:p:11-26

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    References listed on IDEAS

    1. Turnovsky, Stephen J, 1989. "The Term Structure of Interest Rates and the Effects of Macroeconomic Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(3), pages 321-347, August.
    2. Auerbach, Alan J, 1982. "The Index of Leading Indicators: "Measurement without Theory," Thirty-Five Years Later," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 589-595, November.
    3. Franklin D. Berger & William T. Long, III, 1989. "The Texas industrial production index," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Nov, pages 21-38.
    4. Zellner, Arnold & Palm, Franz, 1974. "Time series analysis and simultaneous equation econometric models," Journal of Econometrics, Elsevier, vol. 2(1), pages 17-54, May.
    5. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters,in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc.
    6. Keith R. Phillips, 1988. "New tools for analyzing the Texas economy: indexes of coincident and leading economic indicators," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Jul, pages 1-13.
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    Cited by:

    1. Katharine L. Bradbury & Yolanda K. Kodrzycki, 1992. "What past recoveries say about the outlook for New England," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 15-32.

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    New England ; Employment (Economic theory);


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