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Forecasting GDP at the regional level with many predictors

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  • Robert Lehmann
  • Klaus Wohlrabe

Abstract

In this paper, we assess the accuracy of macroeconomic forecasts at the regional level using a large data set at quarterly frequency. We forecast gross domestic product (GDP) for two German states (Free State of Saxony and Baden-Württemberg) and Eastern Germany. We overcome the problem of a 'data-poor environment' at the sub-national level by complementing various regional indicators with more than 200 national and international ones. We calculate single-indicator, multi-indicator, pooled and factor forecasts in a pseudo real-time setting. Our results show that we can significantly increase forecast accuracy compared to an autoregressive benchmark model, both for short and long term predictions. Furthermore, regional indicators play a crucial role for forecasting regional GDP.

Suggested Citation

  • Robert Lehmann & Klaus Wohlrabe, 2013. "Forecasting GDP at the regional level with many predictors," ERSA conference papers ersa13p15, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa13p15
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    More about this item

    Keywords

    LEADING INDICATORS; REGIONAL FORECASTING; FORECAST EVALUATION; FORECAST COMBINATION; DATA RICH ENVIRONMENT;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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