A More Timely and Useful Index of Leading Indicators

Effectively predicting cyclical movements in the economy is a major challenge. The U.S. leading index (LI) has long been used to analyze and predict economic fluctuations. We describe and test a new procedure for making the LI more timely. The new LI significantly outperforms its older counterpart....

Full description

Saved in:
Bibliographic Details
Published in:Journal of business & economic statistics 2007-01, Vol.25 (1), p.110-120
Main Authors: McGuckin, Robert H, Ozyildirim, Ataman, Zarnowitz, Victor
Format: Article
Language:English
Subjects:
Business cycle
Business cycles
Economic conditions
Economic fluctuations
Economic forecasting
Economic forecasts
Economic indices
Forecasting
Forecasting models
Forecasting standards
Indicators
Leading index
Leading indicators
Modeling
Statistical forecasts
Studies
Temporal currency
Time series forecasting
Times series
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Effectively predicting cyclical movements in the economy is a major challenge. The U.S. leading index (LI) has long been used to analyze and predict economic fluctuations. We describe and test a new procedure for making the LI more timely. The new LI significantly outperforms its older counterpart. It offers substantial gains in real-time, out-of-sample forecasts of changes in aggregate economic activity (real GDP, the index of coincident indicators, and industrial production) and provides timely and accurate ex ante information for predicting not only business cycle turning points, but also monthly changes in the economy.
ISSN:0735-0015
1537-2707
DOI:10.1198/073500106000000279