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This is what the US leading indicators lead

Author

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  • Camacho, Maximo
  • Pérez Quirós, Gabriel

Abstract

We propose an optimal filter to transform the Conference Board Composite Leading Index (CLI) into recession probabilities in the US economy. We also analyze the CLI's accuracy at anticipating US output growth. We compare the predictive performance of linear, VAR extensions of smooth transition regression and switching regimes, probit, nonparametric models and conclude that a combination of the switching regimes and nonparametric forecasts is the best strategy at predicting both the NBER business cycle schedule and GDP growth. This confirms the usefulness of CLI, even in a real-time analysis. JEL Classification: C32, C53

Suggested Citation

  • Camacho, Maximo & Pérez Quirós, Gabriel, 2000. "This is what the US leading indicators lead," Working Paper Series 27, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:200027
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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