The Financial Crisis from a Forecaster’s Perspective
AbstractThis paper analyses the recession in 2008/2009 in Germany, which is very different from previous recessions, in particular regarding its cause and magnitude. We show to what extent forecasters and forecasts based on leading indicators fail to detect the timing and the magnitude of the recession. This study shows that large forecast errors for both expert forecasts and forecasts based on leading indicators resulted during this recession which implies that the recession was very difficult to forecast. However, some leading indicators (survey data, risk spreads, stock prices) have indicated an economic downturn and hence, beat univariate time series models. Although the combination of individual forecasts provides an improvement compared to the benchmark model, the combined forecasts are worse than several individual models. A comparison of expert forecasts with the best forecasts based on leading indicators shows only minor deviations. Overall, the range for an improvement of expert forecasts during the crisis compared to indicator forecasts is relatively small.
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Bibliographic InfoPaper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 5.
Date of creation: Mar 2011
Date of revision:
leading indicators; recession; consensus forecast; non-linearities;
Find related papers by JEL classification:
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-12 (All new papers)
- NEP-CBA-2011-03-12 (Central Banking)
- NEP-FOR-2011-03-12 (Forecasting)
- NEP-MAC-2011-03-12 (Macroeconomics)
- NEP-RMG-2011-03-12 (Risk Management)
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- Katja Drechsel & Rolf Scheufele, 2012.
"Bottom-up or Direct? Forecasting German GDP in a Data-rich Environment,"
2012-16, Swiss National Bank.
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- Christian Seiler & Klaus Wohlrabe, 2013. "Das ifo Geschäftsklima und die deutsche Konjunktur," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 66(18), pages 17-21, October.
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