Predicting Growth Rates and Recessions. Assessing U.S. Leading Indicators under Real-Time Conditions
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Predicting Growth Rates and Recessions. Assessing U.S. Leading Indicators under Real-Time Conditions
Dovern, Jonas | Ziegler, Christina
Applied Economics Quarterly, Vol. 54 (2008), Iss. 4 : pp. 293–318
2 Citations (CrossRef)
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1The Kiel Institute for the World Economy (IfW), Germany.
2Corresponding author. ifo Institute for Economic Research at the University of Munich, Germany, and University of Leipzig, Germany.
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Abstract
In this paper we analyze the power of various indicators to predict growth rates of aggregate production using real-time data for the US. In addition, we assess their ability to predict recessions. We consider four groups of indicators: survey data, composite indicators, real economic indicators, and financial data. Almost all indicators are found to improve short-run growth forecasts whereas results for four quarter ahead growth forecasts and the prediction of recession probabilities in general is mixed. We can confirm the result that an indicator suited to improve growth forecasts does not necessarily help to produce more accurate recession forecasts. Only composite leading indicators perform generally well in both forecasting exercises.