Short-term forecasting with business surveys: Evidence for German IHK data at federal state level

Lars Wenzel and Andre Wolf

No 140, HWWI Research Papers from Hamburg Institute of International Economics (HWWI)

Abstract: We investigate the performance of the IHK business climate indices as forecasting tools within a growth framework at the level of four federal states in Northern Germany. In doing this, we match quarterly index scores with estimates of quarterly production data, generated through a Chow-Lin procedure. Estimating the model reveals strong linkages of the index scores to short-term output growth at the regional level, even after controlling for prior information on the position in the business cycle as well as for nation-wide fluctuations. Examining the forecasting accuracy of our model by means of out-of-sample predictions confirms these results: the model clearly outperforms an autoregressive benchmark. This can to a large part be traced back to information conveyed by the IHK index.

Date: 2013
New Economics Papers: this item is included in nep-for
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