Can confidence indicators be useful to predict short term real GDP growth?

Annabelle Mourougane and Moreno Roma

No 133, Working Paper Series from European Central Bank

Abstract: We investigate the usefulness of the European Commission confidence indicators in forecasting real GDP growth rates in the short-run in selected euro area countries (Belgium, Spain, Germany, France, Italy and the Netherlands) which account for almost 90% of the euro area. We estimate a linear relationship between real GDP and confidence indicators and we compare the forecasting performance of the estimated models with a benchmark ARIMA model. We generally find that confidence indicators can be useful in forecasting real GDP growth rates in the short run in a number of countries (Belgium, Germany, France, Italy and the Netherlands). Notwithstanding some signs of instability in the relationship between confidence indicators and real GDP, improvements with the use of time-varying parameter models appear to be fairly limited but confirm the findings obtained with constant parameter techniques. The results are robust to a wide range of variant tests implemented. JEL Classification: C22, E27

Keywords: confidence indicators; forecasting real GDP; Kalman filter (search for similar items in EconPapers)
Date: 2002-03
Note: 337417
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Citations: View citations in EconPapers (18)

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Journal Article: Can confidence indicators be useful to predict short term real GDP growth? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2002133

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