The Financial Crisis from a Forecaster’s Perspective

Katja Drechsel and Rolf Scheufele
Authors registered in the RePEc Author Service: Katja Heinisch

No 5/2011, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This paper analyses the recession in 2008/2009 in Germany, which is very different from previous recessions, in particular regarding its cause and magnitude. We show to what extent forecasters and forecasts based on leading indicators fail to detect the timing and the magnitude of the recession. This study shows that large forecast errors for both expert forecasts and forecasts based on leading indicators resulted during this recession which implies that the recession was very difficult to forecast. However, some leading indicators (survey data, risk spreads, stock prices) have indicated an economic downturn and hence, beat univariate time series models. Although the combination of individual forecasts provides an improvement compared to the benchmark model, the combined forecasts are worse than several individual models. A comparison of expert forecasts with the best forecasts based on leading indicators shows only minor deviations. Overall, the range for an improvement of expert forecasts during the crisis compared to indicator forecasts is relatively small.

Keywords: Leading indicators; recession; consensus forecast; non-linearities; Frühindikatoren; Rezession; Consensus Prognose; Nichtlinearitäten (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:iwh-5-11

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