Performance Evaluation of the New Connecticut Leading Employment Index Using Lead Profiles and BVAR Models

Anirvan Banerji (), Pami Dua () and Stephen M. Miller ()

No 2002-34, Working papers from University of Connecticut, Department of Economics

Abstract: Dua and Miller (1996) created leading and coincident employment indexes for the state of Connecticut, following Moore's (1981) work at the national level. The performance of the Dua-Miller indexes following the recession of the early 1990s fell short of expectations. This paper performs two tasks. First, it describes the process of revising the Connecticut Coincident and Leading Employment Indexes. Second, it analyzes the statistical properties and performance of the new indexes by comparing the lead profiles of the new and old indexes as well as their out-of-sample forecasting performance, using the Bayesian Vector Autoregressive (BVAR) method. The new indexes show improved performance in dating employment cycle chronologies. The lead profile test demonstrates that superiority in a rigorous, non-parametric statistic fashion. The mixed evidence on the BVAR forecasting experiments illustrates the truth in the Granger and Newbold (1986) caution that leading indexes properly predict cycle turning points and do not necessarily provide accurate forecasts except at turning points, a view that our results support.

Keywords: Business cycles; leading and coincident employment indexex; turning points (search for similar items in EconPapers)
JEL-codes: C11 C43 C53 E32 E37 (search for similar items in EconPapers)
Date: 2002-10, Revised 2005-06
Note: Funding for Banerji.s participation came from the Connecticut Center for Economic Analysis, the Connecticut Department of Labor, and the Connecticut Department of Economic and Community Development.
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Forthcoming in the Journal of Forecasting

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http://www.econ.uconn.edu/working/2002-34r.pdf Full text (revised version) (application/pdf)
http://www.econ.uconn.edu/working/2002-34.pdf Full text (original version) (application/pdf)

Related works:
Working Paper: Performance Evaluation of the New Connecticut Leading Employment Index Using Lead Profiles and BVAR Models (2003)
Journal Article: Performance evaluation of the New Connecticut Leading Employment Index using lead profiles and BVAR models (2006)
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