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Sunday, April 09, 2006

Greenspan Scoffs at Conference Board's Leading Indicators

Calculated Risk finds an interesting passage in the transcripts from the 2000 FOMC meetings:

Calculated Risk: Are Conference Board Leading Indicators Useless?: In a Federal Reserve FOMC transcript released last week, Chairman Greenspan commented that he thought the Conference Board leading indicators were useless in real time:

"As an aside, the probability distribution based on the leading indicators looks remarkably good, but my recollection is that about every three years the Conference Board revises back a series that did not work during a particular time period, so the index is accurate only retrospectively. I’m curious to know whether these are the currently officially published data or the data that were available at the time. I know the answer to the question and it is not good!" [Laughter]

Chairman Alan Greenspan, June 28, 2000, emphasis added. As an example, since the Yield Curve has been signaling a possible recession, the Conference Board responded by changing how they use the Yield Curve: The New Treatment of the Yield Spread in the TCB Composite Index of Leading Indicators. Many researchers also believe Consumer Confidence has no predictive value. See this paper I linked to last year that argued consumer confidence indicators were useless for predicting future spending patterns.

Here are a few more papers on this topic (the latest is a 2004 Stock and Watson paper).

    Posted by on Sunday, April 9, 2006 at 03:54 PM in Economics, Monetary Policy | Permalink  TrackBack (0)  Comments (1)

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