Forecasting economic activity in Germany: how useful are sentiment indicators?
AbstractWe analyze four economic sentiment indicators for the German economy regarding their ability to forecast economic activity. Using cross correlations and Granger causality tests we find that the ifo business expectations (ifo), the Purchasing Managers Index (PMI) and the ZEW Indicator of Economic Sentiment (ZEW) lead the yearon-year growth rate of German industrial production by five months. Taking into account the publication lag of industrial production this lead is even larger. On the contrary, the European Commission?s Economic Sentiment Indicator (ESIN) does not exhibit a lead but rather seems to coincide or even lag economic activity. Analyzing lead/lag structures among the indicators we find that the ZEW indicator leads the ifo business expectations significantly by one month and that the latter has a onemonth lead over the PMI. Out-of-sample forecast evaluations suggest that both ifo and ZEW provide the best forecasts for industrial production among the three indicators ifo, PMI and ZEW. It is found that the ZEW indicator performs better than the ifo and PMI over the whole sample (Jan. 1994 – Mar. 2002) and especially over horizons from six to twelve months. The ifo expectations predict better at shorter horizons (up to three months) and is superior to the ZEW and PMI indicator when a shorter sample (Jan. 1998 – Mar. 2002) is regarded. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-56.
Date of creation: 2002
Date of revision:
leading indicators; Germany; ifo; zew; PMI; ESIN;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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.:
- 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.
- Ulrich Fritsche & Sabine Stephan, 2002. "Leading Indicators of German Business Cycles - An Assessment of Properties," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 222(3), pages 289-315.
- Ulrich Fritsche & Sabine Stephan, 2000. "Leading Indicators of German Business Cycles: An Assessment of Properties," Macroeconomics 0004005, EconWPA.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992.
"Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?,"
Journal of Econometrics,
Elsevier, vol. 54(1-3), pages 159-178.
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Whitney K. Newey & Kenneth D. West, 1986.
"A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix,"
NBER Technical Working Papers
0055, National Bureau of Economic Research, Inc.
- Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
- Ulrich Fritsche, 1999. "Vorlaufeigenschaften von Ifo-Indikatoren für Westdeutschland," Discussion Papers of DIW Berlin 179, DIW Berlin, German Institute for Economic Research.
- Kenneth D. West & Whitney K. Newey, 1995.
"Automatic Lag Selection in Covariance Matrix Estimation,"
NBER Technical Working Papers
0144, National Bureau of Economic Research, Inc.
- Newey, Whitney K & West, Kenneth D, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 631-53, October.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Norbert Funke, 1997. "Predicting recessions: Some evidence for Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(1), pages 90-102, March.
- Konstantin A. Kholodilin & Boriss Siliverstovs, 2006.
"On the Forecasting Properties of the Alternative Leading Indicators for the German GDP: Recent Evidence,"
Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik),
Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 226(3), pages 234-259, May.
- Konstantin A. Kholodilin & Boriss Siliverstovs, 2005. "On the Forecasting Properties of the Alternative Leading Indicators for the German GDP: Recent Evidence," Discussion Papers of DIW Berlin 522, DIW Berlin, German Institute for Economic Research.
- Hüfner, Felix P. & Lahl, David, 2003. "What Determines the ZEW Indicator?," ZEW Discussion Papers 03-48, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Rossi, José Luiz J. & Laban, Sílvio A. Neto & Claro, Danny Pimentel & Bolzani, Luciana Corrêa, 2009. "Índice de Confiança do Empresário de Pequenos e Médios Negócios no Brasil (IC-PMN): Desenvolvimento e Consolidação," Insper Working Papers wpe_191, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
- Michael J. Lamla & Sarah M. Lein & Jan-Egbert Sturm, 2007. "News and Sectoral Comovement," KOF Working papers 07-183, KOF Swiss Economic Institute, ETH Zurich.
- Claro, Danny P & Júnior, José L. R. & Laban Neto, Sílvio A. & Lucci, Cíntia R. & Bolzani, Luciana C. & Carvalho, Marina D. de, 2009. "Índice de Confiança do Empresário de Pequenos e Médios Negócios no Brasil (IC-PMN): Metodologia e Resultados Preliminares," Insper Working Papers wpe_158, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
- Jan Jacobs & Jan-Egbert Sturm, 2004. "Do Ifo Indicators Help Explain Revisions in German Industrial Production?," CESifo Working Paper Series 1205, CESifo Group Munich.
- Maria Antoinette Silgoner, 2005. "An Overview of European Economic Indicators: Great Variety of Data on the Euro Area, Need for More Extensive Coverage of the New EU Member States," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 66â89.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.