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Turning Point Prediction for the UK Using CSO Leading Indicators

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  • Artis, Michael J, et al

Abstract

This paper examines the performance of the Central Statistical Office's leading indicators for predicting turning points in the U.K. growth cycle. Three methods for extracting a signal are considered: a simple mechanical rule based upon the direction of consecutive movements in the leading indicator and two probabilistic models, namely a standard Bayesian procedure and the sequential probability model. The results suggest that usefulness of the shorter leading index is limited and typically outperformed by naive, nonindicator methods. The longer leading index performs only slightly better showing a lead time of between four and six months in relation to the reference cycle. Coauthors are Robin C. Bladen-Hovell, Denise R. Osborn, Graham W. Smith, and Wenda Zhang. Copyright 1995 by Royal Economic Society.

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  • Artis, Michael J, et al, 1995. "Turning Point Prediction for the UK Using CSO Leading Indicators," Oxford Economic Papers, Oxford University Press, vol. 47(3), pages 397-417, July.
    • Handle: RePEc:oup:oxecpp:v:47:y:1995:i:3:p:397-417
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    Cited by:

    1. Cyrille Lenoel & Garry Young, 2020. "Real-time turning point indicators: Review of current international practices," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2020-05, Economic Statistics Centre of Excellence (ESCoE).
    2. Hendry, David F. & Clements, Michael P., 2003. "Economic forecasting: some lessons from recent research," Economic Modelling, Elsevier, vol. 20(2), pages 301-329, March.
    3. Carriero, Andrea & Marcellino, Massimiliano, 2007. "A comparison of methods for the construction of composite coincident and leading indexes for the UK," International Journal of Forecasting, Elsevier, vol. 23(2), pages 219-236.
    4. Jacques Anas & Muriel Nguiffo-Boyom, 2001. "A New Indicator Based on Neftçi's Approach for Predicting Turning Points of the Euro-Zone Growth Cycle," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(3), pages 364-376.
    5. Simpson, Paul W & Osborn, Denise R & Sensier, Marianne, 2001. "Forecasting UK Industrial Production over the Business Cycle," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(6), pages 405-424, September.
    6. Rebecca A Emerson & David Hendry, 1994. "An evaluation of forecasting using leading indicators," Economics Papers 5., Economics Group, Nuffield College, University of Oxford.
    7. Peaucelle, Irina, 1996. "Prévisions de court terme pour analyser les réformes en Russie (les)," CEPREMAP Working Papers (Couverture Orange) 9610, CEPREMAP.
    8. Michele Fratianni & Michael Artis, 1996. "The lira and the pound in the 1992 currency crisis: Fundamentals or speculation?," Open Economies Review, Springer, vol. 7(1), pages 573-589, March.
    9. Lars-Erik Öller & Lasse Koskinen, 2004. "A classifying procedure for signalling turning points," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(3), pages 197-214.
    10. Simon Hayes, 2001. "Leading indicator information in UK equity prices: an assessment of economic tracking portfolios," Bank of England working papers 137, Bank of England.
    11. Carriero, Andrea & Marcellino, Massimiliano, 2007. "A comparison of methods for the construction of composite coincident and leading indexes for the UK," International Journal of Forecasting, Elsevier, vol. 23(2), pages 219-236.
    12. Nadir Ocal, 2006. "Nonlinear models, composite longer leading indicator and forecasts for UK real GDP," Applied Economics, Taylor & Francis Journals, vol. 38(9), pages 1049-1053.
    13. de Bondt, Gabe J. & Hahn, Elke & Zekaite, Zivile, 2021. "ALICE: Composite leading indicators for euro area inflation cycles," International Journal of Forecasting, Elsevier, vol. 37(2), pages 687-707.
    14. Croce, Roberto M. & Haurin, Donald R., 2009. "Predicting turning points in the housing market," Journal of Housing Economics, Elsevier, vol. 18(4), pages 281-293, December.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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