How Useful is the Carry-Over Effect for Short-Term Economic Forecasting?

52 Pages Posted: 8 Jun 2016

Date Written: 2010

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.

Keywords: forecast uncertainty, growth rates, carry-over effect, variance contribution, Chebyshev density

JEL Classification: C53, E37, C16

Suggested Citation

Tödter, Karl-Heinz, How Useful is the Carry-Over Effect for Short-Term Economic Forecasting? (2010). Bundesbank Series 1 Discussion Paper No. 2010,21, Available at SSRN: https://ssrn.com/abstract=2785385 or http://dx.doi.org/10.2139/ssrn.2785385

Karl-Heinz Tödter (Contact Author)

affiliation not provided to SSRN

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