A Wavelet Evaluation of Some Leading Business Cycle Indicators for the German Economy

Jens J. Krüger ()
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Jens J. Krüger: Department of Law and Economics

Journal of Business Cycle Research, 2021, vol. 17, issue 3, No 3, 293-319

Abstract: Abstract Leading indicators are important variables in business cycle forecasting. We use wavelet analysis to investigate the lead-lag stability of German leading indicators in time-frequency space. This method permits a time-varying relation of the leading indicators to the reference cycle allowing simultaneously to focus on lead-lag stability at the specific business cycle frequencies. In this way we analyze an index of new orders, a survey-based index of business expectations, an index of stock market returns and the interest rate term spread. We confirm that most of these indicators are indeed leading the reference cycle most of the time, but the number of months leading varies considerably over time and is associated with a great deal of estimation uncertainty.

Keywords: Business cycle forecasting; Leading indicators; Wavelet analysis; Phase difference (search for similar items in EconPapers)
JEL-codes: C49 E32 E37 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s41549-021-00060-8

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