Causality Studies of Real GDP, Unemployment, and Leading Indicators

Hrishikesh Vinod and John B. Guerard

Chapter 26 in Handbook of Applied Investment Research, 2020, pp 691-724 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Conference Board’s leading economic index (LEI) is constructed to reveal common turning point patterns in economic data, indirectly guiding fiscal and monetary policy aimed at the dual objectives of increasing the real GDP and reducing the unemployment rate. We study new econometric tools to help identify the exogenous macroeconomic time series “causally” driving the dual objectives. We study components of LEI including oil prices, building permits, stock prices, leading credit index, interest-rate spreads, productivity, among others. Such identification allows policymakers to focus on providing incentives for guiding the actionable variables to achieve dual objectives.

Keywords: Applied Investments; Financial Forecasting; Portfolio Theory; Investment Strategies; Fundamental and Economic Anomalies; Behaviour of Investors (search for similar items in EconPapers)
JEL-codes: G1 G11 G17 (search for similar items in EconPapers)
Date: 2020
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