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How useful is the carry-over effect for short-term economic forecasting?

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  • Tödter, Karl-Heinz

Abstract

The carry-over effect is the advance contribution of the old year to growth in the new year. Among practitioners the informative content of the carry-over effect for short-term forecasting is undisputed and is used routinely in economic forecasting. In this paper, the carry-over effect is analysed 'statistically' and it is shown how it reduces the uncertainty of short-term economic forecasts. This is followed by an empirical analysis of the carry-over effect using simple forecast models as well as Bundesbank and Consensus projections.

Suggested Citation

  • Tödter, Karl-Heinz, 2010. "How useful is the carry-over effect for short-term economic forecasting?," Discussion Paper Series 1: Economic Studies 2010,21, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:201021
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    References listed on IDEAS

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    1. D. Sornette, "undated". "Dragon-Kings, Black Swans and the Prediction of Crises," Working Papers CCSS-09-005, ETH Zurich, Chair of Systems Design.
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    More about this item

    Keywords

    forecast uncertainty; growth rates; carry-over effect; variance contribution; Chebyshev density;
    All these keywords.

    JEL classification:

    • 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
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions

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