Kiel Working Papers, Kiel Institute for World Economics
No 1397:
Predicting Growth Rates and Recessions. Assessing U.S. Leading Indicators Under Real-Time Conditions
Jonas Dovern and Christina Ziegler
Abstract: In this paper we analyze the power of various indicators
to predict growth rates of aggregate production using real-time data. In
addition, we assess their ability to predict turning points of the economy.
We consider four groups of indicators: survey data, composite indicators,
real economic indicators, and financial data. Almost all indicators are
found to improve short-run growth forecasts whereas the results for
four-quarter-ahead growth forecasts and the prediction of recession
probabilities in general are mixed. We can confirm the result that an
indicator suited to improve growth forecasts does not necessarily help to
produce more accurate recession forecasts. Only composite leading
indicators perform generally well in both forecasting exercises.
Keywords: leading indicators, forecasting, recessions; (follow links to similar papers)
JEL-Codes: C25,C32,E32,E37; (follow links to similar papers)
25 pages, January 2008
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