Projecting the Medium-Term: Outcomes and Errors for GDP Growth

69 Pages Posted: 27 Nov 2007 Last revised: 26 Aug 2008

See all articles by Marcus Kappler

Marcus Kappler

Center for European Economic Research (ZEW)

Date Written: 2007


The focus of this paper is the evaluation of a very popular method for potential output estimation and medium-term forecasting - the production function approach - in terms of predictive performance. For this purpose, a forecast evaluation for the three to five years ahead predictions of GDP growth for the individual G7 countries is conducted. To carry out the forecast performance check a particular testing framework is derived that allows the computation of robust test statistics given the specific nature of the generated out-of sample forecasts. In addition, medium-term GDP projections from national and international institutions are examined and it is assessed whether these projections convey a reliable view about future economic developments and whether there is scope for improving their predictive content.

Keywords: Potential output, projections, forecast evaluation

JEL Classification: E23, E27, C53

Suggested Citation

Kappler, Marcus, Projecting the Medium-Term: Outcomes and Errors for GDP Growth (2007). ZEW - Centre for European Economic Research Discussion Paper No. 07-068, Available at SSRN: or

Marcus Kappler (Contact Author)

Center for European Economic Research (ZEW) ( email )

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