Leading Indicators of German Business Cycles: An Assessment of Properties

Ulrich Fritsche () and Sabine Stephan
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Sabine Stephan: German Institute for Economic Research

Macroeconomics from EconWPA

Abstract: A reliable leading indicator should possess the following properties: (1) The movements in the indicator series should resemble those in the business cycle reference series. (2) The relation between the reference series and the indicator should be statistically significant and stable over time. (3) The inclusion of the indicator in out-of-sample forecasting procedures should improve the predictive power. Our analysis deals with tests for these requirements applied to German data. We used frequency domain analysis, different Granger-causality tests and out-of sample forecasts. Only few indicators passed all tests. Their inclusion into VAR-based forecasts improves the forecast in the very short run.

Keywords: Business Cycle; Germany; Indicators (search for similar items in EconPapers)
JEL-codes: E32 L60 L70 (search for similar items in EconPapers)
Date: 2000-05-11
Note: Type of Document - Acrobat PDF; pages: 32; figures: included
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http://129.3.20.41/eps/mac/papers/0004/0004005.pdf (application/pdf)

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Working Paper: Leading Indicators of German Business Cycles: An Assessment of Properties (2000)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0004005

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