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

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  • Victor Zarnowitz
  • Phillip Braun

Abstract

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.

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  • Victor Zarnowitz & Phillip Braun, 1989. "Major Macroeconomic Variables and Leading Indexes: Some Estimates of Their Interrelations, 1886-1982," NBER Working Papers 2812, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2812
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    Cited by:

    1. Justesen, Mogens K., 2008. "The effect of economic freedom on growth revisited: New evidence on causality from a panel of countries 1970-1999," European Journal of Political Economy, Elsevier, vol. 24(3), pages 642-660, September.
    2. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409, National Bureau of Economic Research, Inc.
    3. Maximo Camacho, 2004. "Vector smooth transition regression models for US GDP and the composite index of leading indicators," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(3), pages 173-196.
    4. James H. Stock & Mark W. Watson, 1990. "Business Cycle Properties of Selected U.S. Economic Time Series, 1959-1988," Working Papers 1990-1, Princeton University. Economics Department..
    5. Akhter Faroque & William Veloce, 2010. "Fundamentals versus the leading index-the forecasting of Canada's output growth since 1991: an encompassing approach," Applied Economics, Taylor & Francis Journals, vol. 42(10), pages 1227-1243.

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