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Forecasting Euro-Area Industrial Production Using (Mostly) Business Surveys Data

Author

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  • Bruno, Giancarlo
  • Lupi, Claudio

Abstract

In this paper we propose a relatively simple procedure to predict Euro-zone industrial production using mostly data derived from the business surveys of the three major economies within the European Monetary Union (France, Germany, and Italy). The basic idea is that of estimating business cyclical indicators to be used as predictors for the industrial production in France and Germany; as far as Italy is concerned, forecasts are produced using a model that in the recent past proved to be able to produce accurate forecasts up to six months ahead. In order to derive quantitative predictors from the business surveys data and to aggregate the nation-wide forecast into the Euro-zone forecast, we propose using an approach based on dynamic factors and unobserved components models. The resulting forecasts are accurate up to six steps ahead.

Suggested Citation

  • Bruno, Giancarlo & Lupi, Claudio, 2003. "Forecasting Euro-Area Industrial Production Using (Mostly) Business Surveys Data," MPRA Paper 42332, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42332
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    References listed on IDEAS

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    1. G. Cainelli & C. Lupi, 1998. "Aggregazione contemporanea e specificazione econometrica nella stima trimestrale dei conti economici nazionali," Working Papers 319, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. James Mitchell & Richard J. Smith & Martin R. Weale, 2002. "Quantification of Qualitative Firm-Level Survey Data," Economic Journal, Royal Economic Society, vol. 112(478), pages 117-135, March.
    3. Giuseppe Parigi & Roberto Golinelli & Giorgio Bodo, 2000. "Forecasting industrial production in the Euro area," Empirical Economics, Springer, vol. 25(4), pages 541-561.
    4. Simpson, Paul W & Osborn, Denise R & Sensier, Marianne, 2001. "Forecasting UK Industrial Production over the Business Cycle," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(6), pages 405-424, September.
    5. Giancarlo Bruno & Claudio Lupi, 2004. "Forecasting industrial production and the early detection of turning points," Empirical Economics, Springer, vol. 29(3), pages 647-671, September.
    6. Batchelor, R. A., 1981. "Aggregate expectations under the stable laws," Journal of Econometrics, Elsevier, vol. 16(2), pages 199-210, June.
    7. Garcia-Ferrer, Antonio & Bujosa-Brun, Marcos, 2000. "Forecasting OECD industrial turning points using unobserved components models with business survey data," International Journal of Forecasting, Elsevier, vol. 16(2), pages 207-227.
    8. Bergstrom, Reinhold, 1995. "The relationship between manufacturing production and different business survey series in Sweden 1968-;1992," International Journal of Forecasting, Elsevier, vol. 11(3), pages 379-393, September.
    9. Brunello, Giorgio & Lupi, Claudio & Ordine, Patrizia, 2000. "Regional Disparities and the Italian NAIRU," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 146-177, January.
    10. Chan Huh, 1998. "Forecasting industrial production using models with business cycle asymmetry," Economic Review, Federal Reserve Bank of San Francisco, pages 29-41.
    11. Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2003. "Macroeconomic forecasting in the Euro area: Country specific versus area-wide information," European Economic Review, Elsevier, vol. 47(1), pages 1-18, February.
    12. Osborn, Denise R. & Heravi, Saeed & Birchenhall, C. R., 1999. "Seasonal unit roots and forecasts of two-digit European industrial production," International Journal of Forecasting, Elsevier, vol. 15(1), pages 27-47, February.
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    14. Carlson, John A & Parkin, J Michael, 1975. "Inflation Expectations," Economica, London School of Economics and Political Science, vol. 42(166), pages 123-138, May.
    15. Roberta Zizza, 2002. "Forecasting the industrial production index for the euro area through forecasts for the main countries," Temi di discussione (Economic working papers) 441, Bank of Italy, Economic Research and International Relations Area.
    16. Alberto Baffigi & Roberto Golinelli & Giuseppe Parigi, 2002. "Real-time GDP forecasting in the euro area," Temi di discussione (Economic working papers) 456, Bank of Italy, Economic Research and International Relations Area.
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    Citations

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    Cited by:

    1. Malgarini, Marco & Margani, Patrizia & Martelli, Bianca Maria, 2005. "Re-engineering the ISAE manufacturing survey," MPRA Paper 42440, University Library of Munich, Germany.
    2. Aleksejs Melihovs & Svetlana Rusakova, 2005. "Short-Term Forecasting of Economic Development in Latvia Using Business and Consumer Survey Data," Working Papers 2005/04, Latvijas Banka.
    3. Javier Jareño, 2007. "Opinion-based surveys in the conjunctural analysis of the Spanish economy," Occasional Papers 0706, Banco de España;Occasional Papers Homepage.

    More about this item

    Keywords

    Forecasting; VAR models; Industrial production; Cyclical Analysis;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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