Predicting Germany's Recessions with Leading Indicators � Evidence from Probit Models
AbstractProbit models are employed to evaluate leading indicators for Germany's recessions. The predictive power of leading indicators is found to be lower than assumed in previous studies. Although, monetary variables provide the best predictive power for recessions, survey data and order inflows show a lag rather than a lead to the recession time series. US interest rates have also some information content with respect to the German cycle. Constructing a multivariate model with a set of variables to predict recessions does not help to improve the forecasts. The out-of-sample performance of the indicators appears to be even worse.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 944.
Length: 20 pages
Date of creation: Sep 1999
Date of revision:
Leading indicators; business cycles; probit models;
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- Ulrich Fritsche, 2001.
"Do Probit Models Help in Forecasting Turning Points in German Business Cycles?,"
Discussion Papers of DIW Berlin
241, DIW Berlin, German Institute for Economic Research.
- Ulrich Fritsche, 2001. "Do probit models help in forecasting turning points of German business cycles?," Macroeconomics 0012022, EconWPA.
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