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Nowcasting: Identifying German Cyclical Turning Points

Author

Listed:
  • Kovacs Kevin
  • Boulier Bryan
  • Stekler Herman

    (Department of Economics, George Washington University, Washington, USA)

Abstract

Historically, forecasters have failed to predict cyclical turning points and the forecasting record in this regard has not improved. This suggests that we should focus on what should be an easier task, recognizing recessions as they occur. We present a new approach that will enable us to determine in real-time when there is a significant deviation from an economy’s dynamic growth path. This approach uses a CUSUM-like methodology and requires us to construct an index,that we call the Economic News Index, from real-time data that shows how the economy is functioning. We apply this approach to German data to nowcast the recessions that began in 2008 and 2012.

Suggested Citation

  • Kovacs Kevin & Boulier Bryan & Stekler Herman, 2017. "Nowcasting: Identifying German Cyclical Turning Points," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 237(4), pages 329-341, August.
    • Handle: RePEc:jns:jbstat:v:237:y:2017:i:4:p:329-341:n:4
    DOI: 10.1515/jbnst-2017-0115
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    References listed on IDEAS

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    1. Ullrich Heilemann & Herman O. Stekler, 2013. "Has The Accuracy of Macroeconomic Forecasts for Germany Improved?," German Economic Review, Verein für Socialpolitik, vol. 14(2), pages 235-253, May.
    2. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
    3. Fildes, Robert & Stekler, Herman, 2002. "Reply to the comments on 'The state of macroeconomic forecasting'," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 503-505, December.
    4. Kathryn Lundquist & Herman O Stekler, 2012. "Interpreting the Performance of Business Economists During the Great Recession," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 47(2), pages 148-154, April.
    5. Loungani, Prakash, 2001. "How accurate are private sector forecasts? Cross-country evidence from consensus forecasts of output growth," International Journal of Forecasting, Elsevier, vol. 17(3), pages 419-432.
    6. Blondell, David & Hoang, Philip & Powell, John G. & Shi, Jing, 2002. "Detection of Financial Time Series Turning Points: A New CUSUM Approach Applied to IPO Cycles," Review of Quantitative Finance and Accounting, Springer, vol. 18(3), pages 293-315, May.
    7. Giusto, Andrea & Piger, Jeremy, 2017. "Identifying business cycle turning points in real time with vector quantization," International Journal of Forecasting, Elsevier, vol. 33(1), pages 174-184.
    8. Stekler, Herman & Symington, Hilary, 2016. "Evaluating qualitative forecasts: The FOMC minutes, 2006–2010," International Journal of Forecasting, Elsevier, vol. 32(2), pages 559-570.
    9. Carlson, John A & Parkin, J Michael, 1975. "Inflation Expectations," Economica, London School of Economics and Political Science, vol. 42(166), pages 123-138, May.
    10. Hamilton, James D., 2011. "Calling recessions in real time," International Journal of Forecasting, Elsevier, vol. 27(4), pages 1006-1026, October.
    11. Robert Goldfarb & H. O. Stekler & Joel David, 2005. "Methodological issues in forecasting: Insights from the egregious business forecast errors of late 1930," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(4), pages 517-542.
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    Cited by:

    1. Ines Fortin & Sebastian P. Koch & Klaus Weyerstrass, 2020. "Evaluation of economic forecasts for Austria," Empirical Economics, Springer, vol. 58(1), pages 107-137, January.

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    More about this item

    Keywords

    Cyclical turns; nowcasts; news; CUSUM-like;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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