TY  - JOUR
AU  - Vaccara,Beatrice N.
AU  - Zarnowitz,Victor
TI  - Forecasting with the Index of Leading Indicators
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 244
PY  - 1978
Y2  - May 1978
UR  - http://www.nber.org/papers/w0244
L1  - http://www.nber.org/papers/w0244.pdf
N1  - Author contact info:
Beatrice N. Vaccara

Victor Zarnowitz
Conference Board
845 3rd Avenue
New York, NY 10022-6679
Tel: 212/339-0432
Fax: 212/836-9757
E-Mail: no email available
AB  - The composite index of leading indicators is found to be a valuable tool for predicting not only the direction but also the size of near- term changes in aggregate economic activity. This conclusion is based on assessments of the leading index as a predictor of (1) business cycle turning points as dated by the National Bureau of Economic Research and (2) quantitative changes in real GNP and the composite index of coincident indicators. Specific smoothing rules are identified which reduce the frequency of false signals but still provide adequate early warning of cyclical turning points. Simple regression models based on first differences in the logarithms produce a comparatively good record of forecasts one and two quarters ahead. The best results are obtained by using predictive chains whereby, e.g., quarterly changes in the lagging index (inverted) for Q[sub t] are used to forecast changes in the leading index in quarter Q which in turn are used to forecast changes in real GNP (or the coincident index) in Q[sub t+2].
ER  -