What do the leading indicators lead?
Article Abstract:
A study models the linear and nonlinear elements of GNP and the composite leading index (CLI) together to test within a formal statistical framework if the CLI is more suitable as a linear predictor or as identifier of turning points. Unlike most studies, this research considers the cointegration introduced between the CLI and GNP resulting from the fashion by which the CLI is developed. Results demonstrate that the CLI is applicable for predicting GNP in either a sample or in an out-of-sample real-time exercise. Along with an error-correction term that corresponds to the logarithmic difference between the CLI level for the last month of the preceding quarter and the level of GNP for the preceding quarter, a simple linear relation between present GNP growth and the CLI growth rate on that month gives rise to relevant forecasts.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1996
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Are survey forecasts of macroeconomic variables rational?
Article Abstract:
The rationality of 11 variables that are used in macroeconomic forecasting is studied. Results show that among the nonstationary variables, only the trade balance, the unemployment rate and housing starts can be described as being rational. The results also show that among the stationary variables, only personal income and consumer prices are in accordance with the rational expectations theory. All other variables studied, in both the stationary and nonstationary series are found to lack rationality. These remaining variables are the forecasts for retail sales, leading indicators, money supply, industrial production and durable goods. One explanation for their lack of rationality is that these six variables do not fully utilize available information.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1995
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On the formation of expected inflation under various conditions: some survey evidence
Article Abstract:
The role of rational expectations in the behavior of economic agents is studied using survey data on the inflationary expectations of households during the period between Jan 1978 and Jun 1985. An analysis of the survey data reveals that households efficiently utilize inflationary forecasts only during periods when inflation is high but fairy stable or when inflation is mild but quite volatile. During periods when inflation is stable and mild, economic forecasts are not as efficiently utilized. However, in periods when inflation was high and volatile, households tend to demand more accurate economic information.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1992
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