FORECASTING AGGREGATE ECONOMIC ACTIVITY: THE USAGE OF SHORT-TERM AND LONG-TERM LEADING INDICATORS (BUSINESS CYCLE)
Abstract
Forecasting changes in aggregate economic activity has been an area of great interest to economists. The Composite Index of Leading Indicators (CLI) is widely used as a signal of changes in economic activity. However, the CLI periodically produces false and ambiguous signals. This problem is due to an averaging of indicators which represent different stages of production and is avoided by splitting the CLI into two separate indexes. The Short-Term Leading Indicator (STI) is composed of those indicators which represent the actual production process. The Long-Term Leading Indicator (LTI) contains those components which are a reflection of the expectational or planning stage of production. In addition, a substitution is made for the real M2 component of the CLI. This partitioning and substitution is shown to be justified on both conceptual and empirical grounds.
Degree
Ph.D.
Subject Area
Economics
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