What Do the Leading Indicators Lead?

James Hamilton and Gabriel Perez-Quiros
Authors registered in the RePEc Author Service: Gabriel Perez Quiros

The Journal of Business, 1996, vol. 69, issue 1, 27-49

Abstract: The authors find that the composite leading index (CLI) is useful for forecasting gross national product (GNP), both in sample and in an out-of-sample real-time exercise. They propose a nonlinear specification in which cyclical shifts of the CLI precede those in GNP. However, the authors find that better forecasts are provided by a simple linear relation between current GNP growth and the growth rate of the CLI during the previous quarter along with an error-correction term corresponding to the previous quarter's logarithmic difference between the level of the CLI and the level of GNP. Copyright 1996 by University of Chicago Press.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:69:y:1996:i:1:p:27-49

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