Comparing sentiment and behavioral based leading indexes for industrial production in Germany: A novel running local test

Yunus Yilmaz, Knut Lehre Seip and Michael Schröder
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Yunus Yilmaz: Ruhr-Universität Bochum, faculty of management and economics
Knut Lehre Seip: Oslo and Akershus University College for Applied Sciences
Michael Schröder: Centre for European Economic Research (ZEW)

Working Papers from Oslo Metropolitan University, Oslo Business School

Abstract: We use a novel method to compare two survey based leading indexes and two behavioral based index to industrial production, IP, Germany 1991-2015 . The sentiment based ifo – index (managers) performs best in predicting the general changes in IP (-0.596, -1.0 being best). The ZEW – index (financial experts) is close (-0.583), and is better in predicting 6 recessions and 5 recoveries. On a third place comes, somewhat unexpectedly, the unemployment index (-0.564) and lastly comes order flow, OF (-0.186). The four indexes all scored low during time windows around 1997 and 2005. Both periods correspond to anomalous episodes in German economy.

Keywords: Leading indexes; industrial production; prediction skill; survey based indexes; Germany (search for similar items in EconPapers)
JEL-codes: C63 E52 H26 O17 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:oml:wpaper:201707

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