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An evaluation of forecasting using leading indicators
Author(s) -
Emerson Rebecca A.,
Hendry David F.
Publication year - 1996
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/(sici)1099-131x(199607)15:4<271::aid-for623>3.0.co;2-7
Subject(s) - macro , econometrics , cointegration , economic indicator , index (typography) , computer science , construct (python library) , economics , macroeconomics , world wide web , programming language
We consider the use of indices of leading indicators in forecasting and macro‐economic modelling. The procedures used to select the components and construct the indices are examined, noting that the composition of indicator systems gets altered frequently. Cointegration within the indices, and between their components and macro‐economic variables are considered as well as the role of co‐breaking to mitigate regime shifts. Issues of model choice and data‐based restrictions are investigated. A framework is proposed for index analysis and selecting indices, and applied to the UK longer‐leading indicator. The effects of adding leading indicators to macro models are considered theoretically and for UK data.