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Do Probit Models Help in Forecasting Turning Points in German Business Cycles?

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  • Ulrich Fritsche

Abstract

In diesem Artikel wird ein Datensatz benutzt, mit dem auch in einer begleitenden Untersuchung die Frühindikatoreigenschaften verschiedener Reihen für den deutschen Konjunkturzyklus getestet wurden. Um die Fähigkeit, Rezessionen zu prognostizieren, zu testen, wird der von Estrella/Mishkin vorgeschlagene Ansatz benutzt. Für die Einteilung der Konjunkturphasen wurde auf Artis et. al. (1997) zurückgegriffen. Der Einwand von Dueker (1997), dass es wichtig ist, zu kontrollieren, ob die Wirtschaft sich schon in einer Rezession befindet, wurde berücksichtigt. Die Resultate der Schätzung sind insgesamt unbefriedigend. Nur die Ifo-Geschäftserwartungen von Vorleistungsgüterproduzenten, die Zinsdifferenz, die langfristigen Zinsen sowie die Geldmenge M2 zeigen befriedigende Vorlaufeigenschaften. In this paper we used a data set constructed for a companion paper (Fritsche/Stephan, 2000) where we explored the leading indicator properties of different time series for the German business cycle. Now we test for the ability of different indicator series to forecast recessions by using a probit approach as proposed by Estrella/Mishkin (1997). The dating procedure refers to the study by Artis et. al. (1997). We took into consideration the criticism made by Dueker (1997) who stated that in the probit model the fact that the economy is already in a state of recession must be controlled for. The results of our estimate are unsatisfactory on the whole. Only the ifo institute's business expectation of producers of intermediate inputs, the interest rate spread, the long-term interest rate, and money supply M2 show satisfactory leading properties.

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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 241.

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Length: 14 p.
Date of creation: 2001
Date of revision:
Handle: RePEc:diw:diwwpp:dp241

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Keywords: business cycle; probit model; modified McFadden¿s R2; recession;

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References

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  1. Jörg Döpke, 1999. "Predicting Germany's Recessions with Leading Indicators � Evidence from Probit Models," Kiel Working Papers 944, Kiel Institute for the World Economy.
  2. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers, C.E.P.R. Discussion Papers 782, C.E.P.R. Discussion Papers.
  3. Ulrich Fritsche & Sabine Stephan, 2000. "Leading Indicators of German Business Cycles: An Assessment of Properties," Discussion Papers of DIW Berlin 207, DIW Berlin, German Institute for Economic Research.
  4. Artis, Michael J & Kontolemis, Zenon G & Osborn, Denise R, 1997. "Business Cycles for G7 and European Countries," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 70(2), pages 249-79, April.
  5. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc.
  6. Bernard, Henri & Gerlach, Stefan, 1998. "Does the Term Structure Predict Recessions? The International Evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 3(3), pages 195-215, July.
  7. Estrella, Arturo, 1998. "A New Measure of Fit for Equations with Dichotomous Dependent Variables," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 16(2), pages 198-205, April.
  8. Michael Dueker, 1997. "Strengthening the case for the yield curve as a predictor of U.S. recessions," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Mar, pages 41-51.
  9. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, Elsevier, vol. 41(7), pages 1375-1401, July.
  10. Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(3), pages 533-540, May.
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Cited by:
  1. Joachim Benner & Carsten-Patrick Meier, 2004. "Prognosegüte alternativer Frühindikatoren für die Konjunktur in Deutschland," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 224(6), pages 639-652, November.
  2. Klaus Abberger & Sascha Becker & Barbara Hofmann & Klaus Wohlrabe, 2007. "Mikrodaten im ifo Institut für Wirtschaftsforschung – Bestand, Verwendung und Zugang," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer, Springer, vol. 1(1), pages 27-42, June.
  3. Joachim Benner & Carsten-Patrick Meier, 2003. "Prognosegüte alternativer Frühindikatoren für die Konjunktur in Deutschland," Kiel Working Papers 1139, Kiel Institute for the World Economy.
  4. Klaus Abberger & Sascha O. Becker & Barbara Hofmann & Klaus Wohlrabe, 2007. "Mikrodaten im ifo Institut für Wirtschaftsforschung: Bestand, Verwendung, Zugang," Ifo Working Paper Series Ifo Working Paper No. 44, Ifo Institute for Economic Research at the University of Munich.
  5. Benner, Joachim & Meier, Carsten-Patrick, 2005. "Was leisten Stimmungsindikatoren für die Prognose des realen Bruttoinlandsprodukts in Deutschland? : Eine Echtzeit-Analyse," Open Access Publications from Kiel Institute for the World Economy, Kiel Institute for the World Economy (IfW) 3725, Kiel Institute for the World Economy (IfW).
  6. Sascha O. Becker & Klaus Wohlrabe, 2008. "European Data Watch: Micro Data at the Ifo Institute for Economic Research – The “Ifo Business Survey”, Usage and Access," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, Duncker & Humblot, Berlin, vol. 128(2), pages 307-319.
  7. Sascha O. Becker & Klaus Wohlrabe, 2007. "Micro Data at the Ifo Institute for Economic Research – The “Ifo Business Survey”, Usage and Access," Ifo Working Paper Series Ifo Working Paper No. 47, Ifo Institute for Economic Research at the University of Munich.

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