Stock J, Watson M.
How Did Leading Indicator Forecasts Do During the 2001 Recession?. Economic Quarterly. 2003;89 (3) :71-90.
AbstractThe 2001 recession differed from other recent recessions in its cause, severity, and scope.
This paper documents the performance of professional forecasters and forecasts based on
leading indicators as the recession unfolded. Professional forecasters found this recession
a difficult one to forecast. A few leading indicators (stock prices, term spreads,
unemployment claims) predicted that growth would slow, but none predicted the sharp
economic slowdown. Several previously reliable leading indicators (housing starts,
orders for new capital equipment, consumer sentiment) provided no early warning
signals. When combined, the leading indicator performed somewhat better than a
benchmark autoregressive forecasting model.
PDF Stock J, Watson M.
Understanding Changes in International Business Cycle Dynamics. 2003.
WebsiteAbstractThe volatility of economic activity in most G7 economies has moderated over the past 40 years.
Also, despite large increases in trade and openness, G7 business cycles have not become more
synchronized. After documenting these facts, we interpret G7 output data using a structural VAR
that separately identifies common international shocks, the domestic effects of spillovers from
foreign idiosyncratic shocks, and the effects of domestic idiosyncratic shocks. This analysis
suggests that, with the exception of Japan, a significant portion of the widespread reduction in
volatility is associated with a reduction in the magnitude of the common international shocks.
Had the common international shocks in the 1980s and 1990s been as large as they were in the
1960s and 1970s, G7 business cycles would have been substantially more volatile and more
highly synchronized than they actually were. (JEL: C3, E5)
PDF Stock J.
The Econometric Analysis of Business Cycles. Medium Econometrisch Toepassingen. 2003;11 (1) :23-26.
PDF Stock J, Watson M.
Forecasting Output and Inflation: The Role of Asset Prices. Journal of Economic Literature. 2003;41 :788-829.
PDF Stock J.
Who Invented Instrumental Variable Regression?. Journal of Economic Perspectives. 2003;17 :177-197.
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