RDP 2000-02: Forecasting Australian Economic Activity Using Leading Indicators Appendix C: Forecast Error Variance Decompositions

Andrea Brischetto and Graham Voss

April 2000

Table C1: Forecast Error Variance Decomposition
Innovation Forecast
(quarters)		 Proportion of forecast error variance for GDP
(Differenced model with 8 lags)
    WM NATSTAT ABS
Leading index 1 0.02 (0.00 0.08) 0.02 (0.00 0.09) 0.06 (0.01 0.15)
  2 0.02 (0.00 0.09) 0.12 (0.05 0.23) 0.08 (0.03 0.20)
  4 0.14 (0.07 0.25) 0.12 (0.06 0.25) 0.10 (0.05 0.23)
  8 0.13 (0.09 0.25) 0.14 (0.09 0.29) 0.15 (0.09 0.32)
  12 0.13 (0.10 0.26) 0.15 (0.10 0.30) 0.16 (0.10 0.32)
GDP 1 0.98 (0.91 1.00) 0.98 (0.91 1.00) 0.94 (0.85 0.99)
  2 0.98 (0.91 1.00) 0.88 (0.76 0.96) 0.92 (0.81 0.97)
  4 0.86 (0.76 0.93) 0.88 (0.76 0.95) 0.90 (0.77 0.95)
  8 0.87 (0.75 0.91) 0.86 (0.70 0.91) 0.85 (0.69 0.90)
  12 0.87 (0.74 0.91) 0.85 (0.69 0.90) 0.84 (0.67 0.89)

Notes: Numbers in parentheses are 90 per cent confidence intervals based on a simple bootstrap procedure involving 500 draws with replacement from the empirical distribution of the VAR innovations.
Table C2: Forecast Error Variance Decomposition
Innovation Forecast
(months)		 Proportion of forecast error variance for employment
(Differenced model with 14 lags)
    WM NATSTAT
Leading index 1 0.00 (0.00 0.02) 0.01 (0.00 0.04)
  3 0.01 (0.00 0.04) 0.03 (0.01 0.07)
  6 0.02 (0.01 0.06) 0.07 (0.04 0.13)
  12 0.12 (0.09 0.20) 0.10 (0.06 0.18)
  24 0.16 (0.12 0.25) 0.10 (0.07 0.19)
  36 0.17 (0.12 0.27) 0.10 (0.07 0.20)
Employment 1 1.00 (0.98 1.00) 0.99 (0.97 1.00)
  3 0.99 (0.95 1.00) 0.97 (0.93 0.99)
  6 0.98 (0.93 0.99) 0.93 (0.87 0.96)
  12 0.88 (0.80 0.91) 0.90 (0.81 0.94)
  24 0.84 (0.74 0.88) 0.90 (0.81 0.93)
  36 0.83 (0.73 0.88) 0.90 (0.80 0.93)

Notes: Numbers in parentheses are 90 per cent confidence intervals based on a simple bootstrap procedure involving 500 draws with replacement from the empirical distribution of the VAR innovations.
Table C3: Forecast Error Variance Decomposition
Innovation Forecast
(months)		 Proportion of forecast error variance for unemployment
(Differenced model with 14 lags)
    WM NATSTAT
Leading index 1 0.00 (0.00 0.02) 0.02 (0.00 0.06)
  3 0.02 (0.01 0.05) 0.05 (0.02 0.10)
  6 0.10 (0.07 0.16) 0.06 (0.03 0.12)
  12 0.19 (0.13 0.27) 0.09 (0.06 0.17)
  24 0.20 (0.14 0.29) 0.10 (0.08 0.19)
  36 0.20 (0.15 0.30) 0.13 (0.09 0.23)
Unemployment 1 1.00 (0.98 1.00) 0.98 (0.94 1.00)
  3 0.98 (0.95 0.99) 0.95 (0.89 0.97)
  6 0.90 (0.84 0.93) 0.94 (0.86 0.97)
  12 0.81 (0.73 0.88) 0.91 (0.81 0.94)
  24 0.80 (0.71 0.86) 0.90 (0.79 0.93)
  36 0.80 (0.70 0.86) 0.87 (0.77 0.91)

Notes: Numbers in parentheses are 90 per cent confidence intervals based on a simple bootstrap procedure involving 500 draws with replacement from the empirical distribution of the VAR innovations.