Local Business Activity Index: Its Construction and Uses†

Local Business Activity Index: Its Construction and Uses ‐reply

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In my article [18] a derived monthly SMSA income series was employed a s a dependent variable to estimate an index of Gross Metropolitan Product. The multiple step-wise regression analysis involving three independent variablestotal nonagricultural employment multiplied by the unemployment rate, bank debits, and the industrial electric power usage in million kilowatt hoursand a "ratio-tomoving-average" method were used in the process of constructing the index.

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“…The existing theory and research in regional economicse.g. Reference items [2, 3, 5, 6, 7, 8, 9, 11, 12, 13, 14,16,17,18,19,201 would seriously question the validity of the assumption made by Pyun and Heck. The attempt to measure the fluctuations in local economic activity using only the nonagricultural employment series envelops more conceptual flaws than the use of the multiple variable series.…”