LEADING INDICATORS AND MACROECONOMIC FORECASTS: AN EMPIRICAL COMPARATIVE ANALYSIS ON THE PREDICTIVE POWER OF LEADING ECONOMIC INDICES
Campus Only Senior Thesis
Bachelor of Arts
Patrick van Horn
Despite opinion and confidence in leading economic indicators varying widely, many economists, businessmen, and central bankers continue to use these predictors to help forecast future macroeconomic conditions and guide decision-making processes. These indicators have been combined to create various indices that aim to anticipate trends and changes in the business cycle. This study investigates the predictive power and accuracy of four popular leading economic indices through an empirical comparison. The comparative analysis of six linear regression models leads to the conclusion that lagged output (real GDP) provides the best forecast for economic growth and that popular indices comparatively lack accuracy. Additionally, no lagged variable is able to predict turning points in the economy and instead can only predict macroeconomic conditions with continuing trends.
Taraska, Margareta, "LEADING INDICATORS AND MACROECONOMIC FORECASTS: AN EMPIRICAL COMPARATIVE ANALYSIS ON THE PREDICTIVE POWER OF LEADING ECONOMIC INDICES" (2022). Scripps Senior Theses. 1992.
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.