Do probit models help in forecasting turning points of German business cycles?
In this paper we used a data set constructed for a companion paper (Fritsche/Stephan, 2000) where we explored the leading indicator properties of different time series for the German business cycle. Now we test for the ability of different indicator series to forecast recessions by using a probit approach as proposed by Estrella/Mishkin (1997). The dating procedure refers to the study by Artis et. al. (1997). We took into consideration the criticism made by Dueker (1997) who stated that in the probit model the fact that the economy is already in a state of recession must be controlled for. The results of our estimate are unsatisfactory on the whole. Only the ifo institute's business expectation of producers of intermediate inputs, the interest rate spread, the long-term interest rate, and money supply M2 show satisfactory leading properties.
|Date of creation:||28 Feb 2001|
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- Ulrich Fritsche & Sabine Stephan, 2002.
"Leading Indicators of German Business Cycles - An Assessment of Properties,"
Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik),
Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 222(3), pages 289-315.
- Ulrich Fritsche & Sabine Stephan, 2000. "Leading Indicators of German Business Cycles: An Assessment of Properties," Macroeconomics 0004005, EconWPA.
- Ulrich Fritsche & Sabine Stephan, 2000. "Leading Indicators of German Business Cycles: An Assessment of Properties," Discussion Papers of DIW Berlin 207, DIW Berlin, German Institute for Economic Research.
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Elsevier, vol. 41(3), pages 475-512, May.
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- Estrella, Arturo, 1998.
"A New Measure of Fit for Equations with Dichotomous Dependent Variables,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 16(2), pages 198-205, April.
- Arturo Estrella, 1997. "A new measure of fit for equations with dichotomous dependent variables," Research Paper 9716, Federal Reserve Bank of New York.
- Döpke, Jörg, 1999. "Predicting Germany's recessions with leading indicators: Evidence from probit models," Kiel Working Papers 944, Kiel Institute for the World Economy (IfW).
- Stock, J.H. & Watson, M.W., 1989.
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178d, Harvard - J.F. Kennedy School of Government.
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- Artis, Michael J & Kontolemis, Zenon G & Osborn, Denise R, 1997. "Business Cycles for G7 and European Countries," The Journal of Business, University of Chicago Press, vol. 70(2), pages 249-79, April.
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