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The forecasting quality of the Ifo Index

Author

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  • Hans-Werner Sinn
  • Klaus Abberger

Abstract

In January 2006, the Ifo Business Climate Index reached its highest level since May 2000. Many have asked whether this high level leads us also to expect a similarly high growth as in 2000, or whether a higher business climate index "only" indicates that the upswing has gained in breadth but not how strong economic growth will be. This is correct in principle, but still the forecasting strength of the Ifo Index for economic growth is considerable. A good leading indicator is expected to provide timely signals of economic turning points and to progresses relatively smoothly so that the economic situation can be assessed quickly and reliably. Both demands are met by the Ifo Index. It gives clear, early signals on the state of economic developments. If one compares the Ifo Index with the growth of real GDP, it is clear that the Ifo Index is an extremely reliable indicator of the state of the economy in Germany.

Suggested Citation

  • Hans-Werner Sinn & Klaus Abberger, 2006. "The forecasting quality of the Ifo Index," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 59(04), pages 35-36, February.
    • Handle: RePEc:ces:ifosdt:v:59:y:2006:i:04:p:35-36
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    Cited by:

    1. Steiner, Christian & Groß, Anne & Entorf, Horst, 2009. "Return and Volatility Reactions to Monthly Announcements of Business Cycle Forecasts: An Event Study Based on High-Frequency Data," ZEW Discussion Papers 09-010, ZEW - Leibniz Centre for European Economic Research.
    2. Robert Lehmann, 2023. "The Forecasting Power of the ifo Business Survey," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 19(1), pages 43-94, March.
    3. Werner Hölzl & Gerhard Schwarz, 2014. "Der WIFO-Konjunkturtest: Methodik und Prognoseeigenschaften," WIFO Monatsberichte (monthly reports), WIFO, vol. 87(12), pages 835-850, December.

    More about this item

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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