Forecasting Quarter-on-Quarter Changes of German GDP with Monthly Business Tendency Survey Results
AbstractResults from business tendency surveys are often used to construct leading indicators. The indicators are then, for example, employed to forecast GDP growth. In this article more detailed results of business tendency surveys are used to forecast quarter-onquarter GDP growth. The target series is very challenging because this type of growth rate leads to quite volatile time series. The present study focuses on German GDP data and survey results provided by the Ifo Institute. Since numerous time series of possible indicators result from the surveys, methods that can handle this setting are applied. One candidate method is principal component analysis, which is used to reduce dimensionality. On the other hand, subset selection procedures are applied. For the present setting the latter method seems more successful than principal components. But this is not a statement about the two types of procedures in general. Which method should be favoured depends very much on the aims of the specific study.
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Bibliographic InfoPaper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 40.
Date of creation: 2007
Date of revision:
Business tendency surveys; business cycle analysis; principal component regression; subset selection.;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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