Forecasting the Global Electronics Cycle with Leading Indicators: A VAR Approach
Developments in the global electronics industry are typically monitored by tracking indicators that span a whole spectrum of activities in the sector. However, these indicators invariably give mixed signals at each point in time, thereby hampering efforts at prediction. In this paper, we present a unified framework for forecasting the global electronics cycle by constructing a VAR model that captures the economic interactions between leading indicators representing expectations, investments, orders, inventories and prices. The ability of the indicators to presage world semiconductor sales is assessed by Granger causality tests. The VAR model is also used to derive the dynamic paths of adjustment of global chip sales in response to shocks in each of the leading variables. These impulse response functions conform to our theoretical priors and confirm the leading quality of the selected indicators. Finally, out-of-sample forecasts of global chip sales are generated from the VAR model and compared with predictions from a univariate model as well as a model which uses a composite index of the leading indicators. An evaluation of their relative accuracy suggests that the VAR model's forecasting performance is superior to that of the univariate model and comparable to that of the composite index model
|Date of creation:||11 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
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.:
- Cheung, Yin-Wong & Lai, Kon S, 1995. "Lag Order and Critical Values of a Modified Dickey-Fuller Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 411-19, August.
- Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901.
- Veloce, William, 1996. "An evaluation of the leading indicators for the Canadian economy using time series analysis," International Journal of Forecasting, Elsevier, vol. 12(3), pages 403-416, September.
- Christopher A. Sims & Tao Zha, 1995.
"Error bands for impulse responses,"
95-6, Federal Reserve Bank of Atlanta.
- Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992.
"Efficient Tests for an Autoregressive Unit Root,"
NBER Technical Working Papers
0130, National Bureau of Economic Research, Inc.
- Chong, Yock Y & Hendry, David F, 1986. "Econometric Evaluation of Linear Macro-Economic Models," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 671-90, August.
- 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.
- Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report 93, Federal Reserve Bank of Minneapolis.
- Serena Ng & Pierre Perron, 2001.
"LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power,"
Econometric Society, vol. 69(6), pages 1519-1554, November.
- Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
- Diebold, Francis X & Mariano, Roberto S, 1995.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 13(3), pages 253-63, July.
- Tom Doan, . "DMARIANO: RATS procedure to compute Diebold-Mariano Forecast Comparison Test," Statistical Software Components RTS00055, Boston College Department of Economics.
- Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc.
- Giorgio Bodo & Roberto Golinelli & Giuseppe Parigi, 2000.
"Forecasting Industrial Production in the Euro Area,"
Temi di discussione (Economic working papers)
370, Bank of Italy, Economic Research and International Relations Area.
- Giuseppe Parigi & Roberto Golinelli & Giorgio Bodo, 2000. "Forecasting industrial production in the Euro area," Empirical Economics, Springer, vol. 25(4), pages 541-561.
- Bodo, G. & Golinelli, R. & Parigi, G., 2000. "Forecasting Industrial Production in the Euro Area," Papers 370, Banca Italia - Servizio di Studi.
- Koch, Paul D & Rasche, Robert H, 1988. "An Examination of the Commerce Department Leading-Indicator Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(2), pages 167-87, April.
- 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.
- Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
- Gonzalo Camba-Mendez & George Kapetanios & Richard J. Smith & Martin R. Weale, 2001. "An automatic leading indicator of economic activity: forecasting GDP growth for European countries," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 37.
- Bart Hobijn & Kevin J. Stiroh & Alexis Antoniades, 2003. "Taking the pulse of the tech sector: a coincident index of high-tech activity," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Oct).
- Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
When requesting a correction, please mention this item's handle: RePEc:ecm:ausm04:223. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.