A Dynamic Panel Data Approach to the Forecasting of the GDP of German Länder

Konstantin Kholodilin (), Boriss Siliverstovs and Stefan Kooths

Spatial Economic Analysis, 2008, vol. 3, issue 2, 195-207

Abstract: Abstract In this paper, we make multi-step forecasts of the annual growth rates of the real GDP for each of the 16 German Länder simultaneously. We apply dynamic panel models accounting for spatial dependence between regional GDP. We find that both pooling and accounting for spatial effects help to improve the forecast performance substantially. We demonstrate that the effect of accounting for spatial dependence is more pronounced for longer forecasting horizons (the forecast accuracy gain is about 9% for a 1-year horizon and exceeds 40% for a 5-year horizon). We recommend incorporating a spatial dependence structure into regional forecasting models, especially when long-term forecasts are made.

Keywords: German Länder; forecasting; dynamic panel model; spatial autocorrelation; C21; C23; C53 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (32)

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Working Paper: A Dynamic Panel Data Approach to the Forecasting of the GDP of German Länder (2007)
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DOI: 10.1080/17421770801996656

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