Leading Indicators: What Have We Learned?

Massimiliano Marcellino

No 4977, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We provide a summary updated guide for the construction, use and evaluation of leading indicators, and an assessment of the most relevant recent developments in this field of economic forecasting. To begin with, we analyse the problem of selecting a target coincident variable for the leading indicators, which requires coincident indicator selection, construction of composite coincident indexes, choice of filtering methods, and business cycle dating procedures to transform the continuous target into a binary expansion/recession indicator. Next, we deal with criteria for choosing good leading indicators, and simple non-model based methods to combine them into composite indexes. Then, we examine models and methods to transform the leading indicators into forecasts of the target variable. Finally, we consider the evaluation of the resulting leading indicator based forecasts, and review the recent literature on the forecasting performance of leading indicators.

Keywords: Business cycles; Leading indicators; Coincident indicators; Turning points; Forecasting (search for similar items in EconPapers)
JEL-codes: C53 E32 E37 (search for similar items in EconPapers)
Date: 2005-03
New Economics Papers: this item is included in nep-ecm and nep-mac
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Citations: View citations in EconPapers (13)

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Working Paper: Leading Indicators: What Have We Learned? (2005)
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