Kiel Working Papers, Kiel Institute for World Economics
No 944:
Predicting Germany's Recessions with Leading Indicators ; Evidence from Probit Models
Jörg Döpke
Abstract: Probit models are employed to evaluate leading indicators
for Germany's recessions. The predictive power of leading indicators is
found to be lower than assumed in previous studies. Although, monetary
variables provide the best predictive power for recessions, survey data and
order inflows show a lag rather than a lead to the recession time series.
US interest rates have also some information content with respect to the
German cycle. Constructing a multivariate model with a set of variables to
predict recessions does not help to improve the forecasts. The
out-of-sample performance of the indicators appears to be even worse.
Keywords: Leading indicators, business cycles, probit models; (follow links to similar papers)
20 pages, September 1999
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