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What Determines the ZEW Indicator?

Author

Listed:
  • Hüfner, Felix P.
  • Lahl, David

Abstract

This paper analyzes which factors are driving the ZEW Indicator of Economic Sentiment. Using the results of a poll among survey participants as well as Granger causality tests we identify three groups of influence factors: other sentiment indicators, financial variables and real economy data. In a second step these factors are used to estimate out-of-sample forecasts for the ZEW Indicator. We find that a simple model that includes German manufacturing order data, the German yield structure and the US Consumer Confidence indicator as explanatory variables is able to outperform a naive univariate benchmark model as well as the consensus forecast for the ZEW Indicator as published by news agencies.

Suggested Citation

  • Hüfner, Felix P. & Lahl, David, 2003. "What Determines the ZEW Indicator?," ZEW Discussion Papers 03-48, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:1357
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    References listed on IDEAS

    as
    1. Ulrich Fritsche, 1999. "Vorlaufeigenschaften von Ifo-Indikatoren für Westdeutschland," Discussion Papers of DIW Berlin 179, DIW Berlin, German Institute for Economic Research.
    2. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    3. Ulrich Fritsche & Sabine Stephan, 2000. "Leading Indicators of German Business Cycles: An Assessment of Properties," Macroeconomics 0004005, EconWPA.
    4. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 125-132.
    5. Schröder, Michael & Hüfner, Felix P., 2002. "Forecasting economic activity in Germany: how useful are sentiment indicators?," ZEW Discussion Papers 02-56, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    leading indicators; Germany; zew; forecasting;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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