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This is what the leading indicators lead
Author(s) -
Camacho Maximo,
PerezQuiros Gabriel
Publication year - 2002
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.641
Subject(s) - econometrics , business cycle , probit model , economics , recession , hodrick–prescott filter , economic indicator , parametric statistics , index (typography) , schedule , filter (signal processing) , computer science , statistics , macroeconomics , mathematics , management , world wide web , computer vision
We propose an optimal filter to transform the Conference Board Composite Leading Index (CLI) into recession probabilities in the US economy. We also analyse the CLI's accuracy at anticipating US output growth. We compare the predictive performance of linear, VAR extensions of smooth transition regression and switching regimes, probit, non‐parametric models and conclude that a combination of the switching regimes and non‐parametric forecasts is the best strategy at predicting both the NBER business cycle schedule and GDP growth. This confirms the usefulness of CLI, even in a real‐time analysis. Copyright © 2002 John Wiley & Sons, Ltd.