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Business Cycle 2015: Forecast and Reality

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  • Wolfgang Nierhaus

Abstract

The Ifo Institute has critically assessed the quality of its own business cycle analysis for many years. This article discusses the differences that emerged between Ifo’s forecasts and reality in 2015. It also examines the quality of Ifo’s forecasts on a long-term average. The Ifo Institute’s forecasts of average growth rates of real GDP in 2015 were based on slightly overly pessimistic assumptions of overall framework conditions, and were thus not optimistic enough. In December 2014 an average rate of change of 1.5% of GDP was forecast, while the first provisional official estimate of GDP for 2015 was 1.7%. The absolute forecasting error of 0.2 percentage points was thus clearly within the final revision margin for real GDP set out by the German Federal Statistics Office (average absolute revision: 0.42). The Ifo Institute’s long-term forecasting record is also good. It emerges that the mid-term forecasting error in the period from 1992 to 2015 did not vary significantly from zero, and Ifo’s forecasts are also efficient. Moreover, there has been no deterioration in its accuracy over the past twelve years, which, on the contrary, improved over the period of 1992 to 2003.

Suggested Citation

  • Wolfgang Nierhaus, 2016. "Business Cycle 2015: Forecast and Reality," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(03), pages 34-40, February.
    • Handle: RePEc:ces:ifosdt:v:69:y:2016:i:03:p:34-40
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    File URL: https://www.ifo.de/DocDL/sd-2016-03-nierhaus-prognose-und-wirklichkeit-2016-02-11.pdf
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    References listed on IDEAS

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    2. Stephen K. McNees, 1988. "How accurate are macroeconomic forecasts?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 15-36.
    3. Chatfield, Chris, 1993. "Calculating Interval Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 121-135, April.
    4. Emile Grunberg & Franco Modigliani, 1954. "The Predictability of Social Events," Journal of Political Economy, University of Chicago Press, vol. 62, pages 465-465.
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    Cited by:

    1. Stefan Sauer & Klaus Wohlrabe, 2020. "ifo Handbuch der Konjunkturumfragen," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 88.
    2. Robert Lehmann & Michael Weber, 2016. "Mehr als Kaffeesatzleserei: Eine Evaluation der ifo Prognosen zur Erwerbstätigkeit in Ostdeutschland und Sachsen," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 23(02), pages 22-26, April.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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