In this paper, we make multi-step forecasts of the annual growth rates of the real GDP for each of the 16 German Länder (states) simultaneously. Beside the usual panel data models, such as pooled and fixed-effects models, we apply panel models that explicitly account for spatial dependence between regional GDP. We find that both pooling and accounting for spatial effects helps substantially improve the forecast performance compared to the individual autoregressive models estimated for each of the Länder separately. More importantly, we have demonstrated that effect of accounting for spatial dependence is even more pronounced at longer forecasting horizons (the forecast accuracy gain as measured by the root mean squared forecast error is about 9% at 1-year horizon and exceeds 40% at 5-year horizon). Hence, we strongly recommend incorporating spatial dependence structure into regional forecasting models, especially, when long-term forecasts are made.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number
664.
Length: 19 p. Date of creation: 2007 Date of revision: Publication status: Published in: Spatial Economic Analysis 3 (2008), 2, 1742-1780 Handle: RePEc:diw:diwwpp:dp664
Find related papers by JEL classification: C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Did you know? You can create a compilation of all publications of a group of people, say alumni of a program, your students or memers of an association.