Predicting Business Cycle Phases by Professional Forecasters－ Are They Useful ?

Directional analysis is employed to evaluate the rationality and usefulness of a data set of monthly forecasts for the coincident index in ESRI's Indexes of Business Conditions by professional forecasters.　Using Japanese　ESP Forecast Survey data, our findings indicate that consensus forecasts with horizons of up to four months are valuable, whereas the Leading Index in ESRI's Indexes of Business Conditions is only valuable with horizons of up to two months. This finding suggests that the predictability of Leading DI can be improved with the aid of coincident DI forecasts.