Forecasting Quarter-on-Quarter Changes of German GDP with Monthly Business Tendency Survey Results
Results from business tendency surveys are often used to construct leading indicators. The indicators are then, for example, employed to forecast GDP growth. In this article more detailed results of business tendency surveys are used to forecast quarter-onquarter GDP growth. The target series is very challenging because this type of growth rate leads to quite volatile time series. The present study focuses on German GDP data and survey results provided by the Ifo Institute. Since numerous time series of possible indicators result from the surveys, methods that can handle this setting are applied. One candidate method is principal component analysis, which is used to reduce dimensionality. On the other hand, subset selection procedures are applied. For the present setting the latter method seems more successful than principal components. But this is not a statement about the two types of procedures in general. Which method should be favoured depends very much on the aims of the specific study.
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- Stefan Mittnik & Peter A. Zadrozny, 2004. "Forecasting Quarterly German GDP at Monthly Intervals Using Monthly IFO Business Conditions Data," CESifo Working Paper Series 1203, CESifo Group Munich.
- Entorf, Horst, 1993. "Constructing leading indicators from non-balanced sectoral business survey series," International Journal of Forecasting, Elsevier, vol. 9(2), pages 211-225, August.
- Bair, Eric & Hastie, Trevor & Paul, Debashis & Tibshirani, Robert, 2006. "Prediction by Supervised Principal Components," Journal of the American Statistical Association, American Statistical Association, vol. 101, pages 119-137, March.
- Baffigi, Alberto & Golinelli, Roberto & Parigi, Giuseppe, 2004. "Bridge models to forecast the euro area GDP," International Journal of Forecasting, Elsevier, vol. 20(3), pages 447-460.
- Stock, James H. & Watson, Mark W., 2006. "Forecasting with Many Predictors," Handbook of Economic Forecasting, Elsevier.
- Klaus Abberger & Klaus Wohlrabe, 2006. "Einige Prognoseeigenschaften des ifo Geschäftsklimas - Ein Überblick über die neuere wissenschaftliche Literatur," Ifo Schnelldienst, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 59(22), pages 19-26, November.
- repec:crs:wpaper:9313 is not listed on IDEAS
- Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
- Rünstler, Gerhard & Sédillot, Franck, 2003. "Short-term estimates of euro area real GDP by means of monthly data," Working Paper Series 0276, European Central Bank.
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