A Causality Analysis of Australia's Growth Cycle and the Composite Index of Leading Indicators

Allan P Layton

Australian Economic Papers, 1986, vol. 25, issue 46, 57-66

Abstract: The paper extends recent turning point analyses into the relationship between Australia's leading and coincident indexes of economic indicators. An empirically specified dynamic regression model linking the two measures of activity is used to test for the existence of Granger causality_(1969, 1980). The specification procedure followed is that of L. Haugh and G. E. P. Box_(1977). The analysis supports the existence of unidirectional causality from the leading to the coincident index. The lag involved was found to be five months. These findings provide further, more exhaustive evidence that the constructed index of leading indicators systematically anticipates future f luctuations in aggregate Australian economic activity. Copyright 1986 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Date: 1986
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