Do probit models help in forecasting turning points of German business cycles?
Ulrich Fritsche ()
Macroeconomics from University Library of Munich, Germany
In this paper we used a data set constructed for a companion paper (Fritsche/Stephan, 2000) where we explored the leading indicator properties of different time series for the German business cycle. Now we test for the ability of different indicator series to forecast recessions by using a probit approach as proposed by Estrella/Mishkin (1997). The dating procedure refers to the study by Artis et. al. (1997). We took into consideration the criticism made by Dueker (1997) who stated that in the probit model the fact that the economy is already in a state of recession must be controlled for. The results of our estimate are unsatisfactory on the whole. Only the ifo institute's business expectation of producers of intermediate inputs, the interest rate spread, the long-term interest rate, and money supply M2 show satisfactory leading properties.
Keywords: business cycle; probit model; modified McFadden's R2; recession; Germany (search for similar items in EconPapers)
JEL-codes: E32 L60 L70 (search for similar items in EconPapers)
Note: Type of Document - PDF; prepared on IBM PC; pages: 15 ; figures: included
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Working Paper: Do Probit Models Help in Forecasting Turning Points in German Business Cycles? (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0012022
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