J. Japan Statist. Soc., Vol. 34 (No. 2), pp. 111-127, 2004
Abstract. This paper analyses the performance of forecasts of real economic activity based on the Japanese official business indices in a real-time framework. As in other countries, preliminary numbers of the business indices are first announced, then they are revised. These revisions are often substantial, so that the business indices that are available on a real-time basis often differ from their revised form. This paper explores how this difference can affect forecasts. Results indicate that real-time forecasts based on the diffusion leading index are not significantly worse than forecasts based on the final revised form. Also, the real-time forecasts using the composite leading index are often comparable to those from final revised forms. However, real-time forecasts from the diffusion coincident index are significantly worse than forecasts that use the final revised form.
Key words and phrases: business index, probit model, real-time forecast