Predicting Growth Rates and Recessions. Assessing U.S. Leading Indicators under Real-Time Condition

Jonas Dovern and Christina Ziegler

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2008, vol. 54, issue 4, 293-318

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 recessions. 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 results for four quarter ahead growth forecasts and the prediction of recession probabilities in general is 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 (search for similar items in EconPapers)
JEL-codes: C25 E32 E37 (search for similar items in EconPapers)
Date: 2008
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