Major Macroeconomic Variables and Leading Indexes: Some Estimates of Their Interrelations, 1886-1982

We examine the interactions within sets of up to six variables representing output, alternative measures of money and fiscal operations, inflation, interest rate, and indexes of selected leading indicators. Quarterly series are used, each taken with four lags, for three periods: 1949-82. 1919-40, and 1886-1914. The series are in stationary form, as indicated by unit root tests. For the early years, the quality of the available data presents some serious problems. We find evidence of strong effects on output of the leading indexes and the short-term interest rate. The monetary effects are greatly reduced when these variables are included. Most variables depend more on their own lagged values than on any other factors, but this is not true of the rates of change in output and the composite leading indexes. Some interesting interperiod differences are noted and discussed.