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Monthly recession predictions in real time: A density forecast approach for German industrial production

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  • Katja Rietzler
  • Sabine Stephan

Abstract

In this paper we present a methodology which can help to improve the assessment of the current economic situation. We propose an approach which combines multivariate single equations to forecast the monthly growth rate of industrial production with a density forecast. This allows to estimate the current recession probability. In the analysis the focus is on the real-time problem, i.e. the fact that the reference series (industrial production) as well as important indicators are not available on a timely basis and are often revised substantially over an extended period. For this reason the whole analysis is carried out under real-time conditions. Indeed the forecast of the recession probabilities allows to identify the recession well before it can be seen in the official data. This result is encouraging. But there is still a substantial need for further research.

Suggested Citation

  • Katja Rietzler & Sabine Stephan, 2012. "Monthly recession predictions in real time: A density forecast approach for German industrial production," IMK Working Paper 94-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:wpaper:94-2012
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    Cited by:

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    More about this item

    Keywords

    recession probability; density forecast; forecasting; business cycleresearch; real-time data; real-time conditions;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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