Forecasting GDP at the Regional Level with Many Predictors

27 Pages Posted: 11 Oct 2012

See all articles by Robert Lehmann

Robert Lehmann

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Klaus Wohlrabe

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: October 10, 2012

Abstract

In this paper, we assess the accuracy of macroeconomic forecasts at the regional level using a unique 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 including more than 300 international, national and regional indicators. We calculate single–indicator, multi–indicator and pooled forecasts. Our results show that we can significantly increase forecast accuracy compared to an autoregressive benchmark model, both for short- and long-term predictions. Furthermore, our best leading indicators describe the specific regional economic structure better than other indicators.

Keywords: leading indicators, regional forecasting, forecast evaluation, forecast combination, data rich environment

JEL Classification: C320, C520, C530, E370, R110

Suggested Citation

Lehmann, Robert and Wohlrabe, Klaus, Forecasting GDP at the Regional Level with Many Predictors (October 10, 2012). CESifo Working Paper Series No. 3956. Available at SSRN: https://ssrn.com/abstract=2159662

Robert Lehmann (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Einsteinstrasse 3
Dresden, 01069
Germany
+49(0)351 / 26476-21 (Phone)
+49(0)351 / 26476-20 (Fax)

HOME PAGE: http://www.cesifo-group.de/ifoHome/CESifo-Group/ifoDresden/ifo-ND-Mitarbeiter/cvifod-lehmann_r.html

Klaus Wohlrabe

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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