A measure of the degree of correlation between two variables is the correlation

A measure of the degree of correlation between two

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A measure of the degree of correlation between two variables is the correlation coefficient. This take son values between -1 and 1. If it is 1, then the two variables are perfectly positively correlated. If it is -1 then it is perfectly negatively correlated. An important concept in this section is the leading and lagging relationship that exists. If a variable tends to aid in predicting the future path of GDP then it is a leading variable. Whereas, if real GDP helps to predict the future path of the variable then it is a lagging variable. A coincident variable is one which neither leads of lags real GDP.\ A measure of cyclical variability is the standard deviation of the percentage deviations from trend. Seasonal Adjustment The basic idea of this concept is to observe historical seasonal patterns and then take out the extra amount that we tend to see on average during a particular week, month or quarter simply because of the time if the year. Many macroeconomic time series used in economic analysis is adjusted. Seasonal adjustment takes out the predictable seasonal component, for example, the effect of extra spending over the December holiday season on the money supply.
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