Can confidence indicators be useful to predict short term real GDP growth?
AbstractWe investigate the usefulness of the European Commission confidence indicators in forecasting real GDP growth rates in the short-run in selected euro areas countries (Belgium, Spain, Germany, France, Italy and the Netherlands) which account for almost 90% of the euro area. We estimate a linear relationship between real GDP and confidence indicators and we compare the forecasting performance of the estimated models with a benchmark ARIMA model. We generally find that confidence indicators can be useful in forecasting real GDP growth rates in the short run in a number of countries (Belgium, Germany, France, Italy and the Netherlands). Notwithstanding some signs of instability in the relation between confidence indicators and real GDP, improvements with the use of time-varying parameter models appear to be fairly limited but confirm the findings obtained with constant parameter techniques. The results obtained are robust to a wide range of variant tests implemented. JEL Classification: C22; E27.
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Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 133.
Length: 49 pages
Date of creation: Mar 2002
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Other versions of this item:
- Annabelle Mourougane & Moreno Roma, 2003. "Can confidence indicators be useful to predict short term real GDP growth?," Applied Economics Letters, Taylor and Francis Journals, vol. 10(8), pages 519-522.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
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