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The Financial Crisis from a Forecaster’s Perspective

Katja Drechsel and Rolf Scheufele ()
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Katja Drechsel: Institut für Wirtschaftsforschung Halle (IWH), Abteilung Makro- ökonomik, Kleine Märkerstraße 8, D-06108 Halle (Saale)

Authors registered in the RePEc Author Service: Katja Heinisch ()

Credit and Capital Markets, 2012, vol. 45, issue 1, 1–26

Abstract: This paper analyses the recession in 2008/2009 in Germany. This recession is very different from previous recessions in particular regarding their causes 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 in the crisis compared to indicator forecasts is small.

JEL-codes: E37 C53 (search for similar items in EconPapers)
Date: 2012
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