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

Anirvan Banerji (), Pami Dua and Stephen Miller

No 114, Working papers from Centre for Development Economics, Delhi School 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 coincident index shows 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 indexes; turning points; BVAR Models (search for similar items in EconPapers)
JEL-codes: C11 C32 E32 E37 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2003-02
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Related works:
Journal Article: Performance evaluation of the New Connecticut Leading Employment Index using lead profiles and BVAR models (2006)
Working Paper: Performance Evaluation of the New Connecticut Leading Employment Index Using Lead Profiles and BVAR Models (2005)
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