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Evaluating the German Inventory Cycle – Using Data from the Ifo Business Survey

  • Thomas A. Knetsch

Inventory fluctuations are an important phenomenon in business cycles. However, the preliminary data on inventory investment as published in the German national accounts are tremendously prone to revision and therefore ill-equipped to diagnose the current stance of the inventory cycle. The Ifo business survey contains information on the assessments of inventory stocks in manufacturing as well as in retail and wholesale trade. Static factor analysis and a method building on canonical correlations are applied to construct a composite index of inventory fluctuations. Based on recursive estimates, the different variants are assessed as regards the stability of the weighting schemes and the ability to forecast the “true” inventory fluctuations better than the preliminary official releases.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1202.

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Date of creation: 2004
Handle: RePEc:ces:ceswps:_1202
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