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Assessing the forecasting power of the leading composite index in Macedonia

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  • Petreski, Marjan

Abstract

The objective of the paper is to evaluate the forecasting power of the leading composite index of Macedonia. The leading index is a weighted index of indicators which are considered to lead the economic cycle. The main dynamic model in which, first, GDP is represented as autoregressive process, and then lags of the leading index are added, is used to measure the forecasting error behavior with the addition of the leading index and with the imposition of larger time span in the model. The main finding is that the inclusion of the leading index in the model reduces the forecasting error. The forecasting time of the leading composite index in Macedonia is found to be between one and two quarters.

Suggested Citation

  • Petreski, Marjan, 2013. "Assessing the forecasting power of the leading composite index in Macedonia," MPRA Paper 49433, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:49433
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    File URL: https://mpra.ub.uni-muenchen.de/49433/1/MPRA_paper_49433.pdf
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    References listed on IDEAS

    as
    1. Wesley Clair Mitchell & Arthur F. Burns, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1.
    2. 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.
    3. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    economic cycle; leading index; root mean squared forecasting error; Macedonia; distributed lags model;

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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