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Leading Indicators of German Business Cycles. An Assessment of Properties / Frühindikatoren der deutschen Konjunktur. Eine Beurteilung ihrer Eigenschaften

Author

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  • Fritsche Ulrich

    (German Institute for Economic Research (DIW Berlin), Department of Business Cycles and Forecasting, Königin-Luise-Straße 5, D-14195 Berlin)

  • Stephan Sabine

    (German Institute for Economic Research (DIW Berlin), Department of Business Cycles and Forecasting, Königin-Luise-Straße 5, D-14195 Berlin)

Abstract

A reliable leading indicator should possess the following properties: (1) The movements in the indicator series should resemble those in the business cycle reference series. (2) The relation between the reference series and the indicator should be statistically significant and stable over time. (3) The inclusion of the indicator in out-of-sample forecasting procedures should improve the predictive power. Our analysis deals with tests for these requirements applied to German data. We used frequency domain analysis, different Granger-causality tests and out-of sample forecasts. Only few indicators passed all tests. Their inclusion into VAR-based forecasts improves the forecast in the very short run. Further research should concentrate on the unsolved problem of the prediction of business cycle turning points.

Suggested Citation

  • Fritsche Ulrich & Stephan Sabine, 2002. "Leading Indicators of German Business Cycles. An Assessment of Properties / Frühindikatoren der deutschen Konjunktur. Eine Beurteilung ihrer Eigenschaften," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(3), pages 289-315, June.
    • Handle: RePEc:jns:jbstat:v:222:y:2002:i:3:p:289-315
    DOI: 10.1515/jbnst-2002-0302
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    References listed on IDEAS

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