Performance evaluation of the New Connecticut Leading Employment Index using lead profiles and BVAR models
The leading and coincident employment indexes for the state of Connecticut developed following the recession of the early 1990s fell short of expectations. This paper performs two tasks. First, it describes the process of revising the Connecticut Coincident and Leading Employment Indexes. Second, it analyzes the statistical properties and performance of the new indexes by comparing the lead profiles of the new and old indexes as well as their out-of-sample forecasting performance, using the Bayesian Vector Autoregressive (BVAR) method. The new coincident index shows improved performance in dating employment cycle chronologies. The lead profile test demonstrates that superiority in a rigorous, non-parametric statistic fashion. The mixed evidence on the BVAR forecasting experiments illustrates that leading indexes properly predict cycle turning points and do not necessarily provide accurate forecasts except at turning points, a view that our results support. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 25 (2006)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966|
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.:
- Richard M. Todd, 1984. "Improving economic forecasting with Bayesian vector autoregression," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
- Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, June.
- Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986.
"Forecasting and conditional projection using realistic prior distribution,"
93, Federal Reserve Bank of Minneapolis.
- Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983. "Forecasting and Conditional Projection Using Realistic Prior Distributions," NBER Working Papers 1202, National Bureau of Economic Research, Inc.
- Robert B. Litterman, 1985.
"Forecasting with Bayesian vector autoregressions five years of experience,"
274, Federal Reserve Bank of Minneapolis.
- Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
- Zellner, Arnold & Palm, Franz, 1974.
"Time series analysis and simultaneous equation econometric models,"
Journal of Econometrics,
Elsevier, vol. 2(1), pages 17-54, May.
- ZELLNER, Arnold & PALM, Franz, . "Time series analysis and simultaneous equation econometric models," CORE Discussion Papers RP 173, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
- Sims, Christopher A., 1988.
"Bayesian skepticism on unit root econometrics,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 12(2-3), pages 463-474.
- Christopher A. Sims, 1988. "Bayesian skepticism on unit root econometrics," Discussion Paper / Institute for Empirical Macroeconomics 3, Federal Reserve Bank of Minneapolis.
- Layton, Allan P & Moore, Geoffrey H, 1989. "Leading Indicators for the Service Sector," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(3), pages 379-86, July.
- Robert B. Litterman, 1984. "Above-average national growth in 1985 and 1986," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
- Pami Dua & Stephen Miller, 1995. "Forecasting and Analyzing Economic Activity with Coincident and Leading Indexes: The Case of Connecticut," Working papers 1995-05, University of Connecticut, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:jof:jforec:v:25:y:2006:i:6:p:415-437. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.