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Empirical Economics

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11-12-2019

Nowcasting East German GDP growth: a MIDAS approach

Authors: João C. Claudio, Katja Heinisch, Oliver Holtemöller

Published in: Empirical Economics | Issue 1/2020

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Abstract

Economic forecasts are an important element of rational economic policy both on the federal and on the local or regional level. Solid budgetary plans for government expenditures and revenues rely on efficient macroeconomic projections. However, official data on quarterly regional GDP in Germany are not available, and hence, regional GDP forecasts do not play an important role in public budget planning. We provide a new quarterly time series for East German GDP and develop a forecasting approach for East German GDP that takes data availability in real time and regional economic indicators into account. Overall, we find that mixed-data sampling model forecasts for East German GDP in combination with model averaging outperform regional forecast models that only rely on aggregate national information.

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For an general overview on obstacles in regional forecasting, see Lehmann and Wohlrabe (2014b).

Other studies, e.g., Lehmann and Wohlrabe (2015), refer to East Germany excluding Berlin.

Data are available at https://www.iwh-halle.de/en/research/data-and-analysis/macroeconomic-reports/macro-data-download/.

In this paper, we use the terms nowcasting and forecasting similarly, both referring to the current quarter.

See IWH-flash-estimate: http://www.iwh-halle.de/en/research/data-and-analysis/macroeconomic-reports/iwh-flash-indicator/.

A drawback of the ifo survey data for East Germany is that they do not include Berlin.

In contrast to Lehmann and Wohlrabe (2017), we also take the indicators into account that are used for disaggregation of annual data to see whether there are information advantages.

To make the indicators comparable to GDP, we report them in quarterly frequency in the figures.

Table 6 in Appendix B provides an overview of the forecasting properties of our benchmark models.

In forecast round F2 and F3, the same benchmark models are used.

They consider quarterly year-on-year forecasts for the sample 1997–2013.

http://www.iwh-halle.de/en/research/data-and-analysis/iwh-macrometer/iwh-indicators-for-east-germany/.

Data on the expenditure side are even published only with a delay of 2–3 years.

Although quarterly data have been published until 1999, these figures cannot be directly used due to revisions of the regional data up to 5 years.

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Title: Nowcasting East German GDP growth: a MIDAS approach
Authors: João C. Claudio
Katja Heinisch
Oliver Holtemöller
Publication date: 11-12-2019
Publisher: Springer Berlin Heidelberg
Published in: Empirical Economics / Issue 1/2020
Print ISSN: 0377-7332
Electronic ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-019-01810-5

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