Can Confidence Indicators Be Useful to Predict Short Term Real GDP Growth?

49 Pages Posted: 20 Jan 2003

See all articles by Annabelle Mourougane

Annabelle Mourougane

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Moreno Roma

European Central Bank (ECB)

Date Written: March 2002

Abstract

We investigate the usefulness of the European Commission confidence indicators in forecasting real GDP growth rates in the short-run in selected euro areas countries (Belgium, Spain, Germany, France, Italy and the Netherlands) which account for almost 90% of the euro area. We estimate a linear relationship between real GDP and confidence indicators and we compare the forecasting performance of the estimated models with a benchmark ARIMA model. We generally find that confidence indicators can be useful in forecasting real GDP growth rates in the short run in a number of countries (Belgium, Germany, France, Italy and the Netherlands). Notwithstanding some signs of instability in the relation between confidence indicators and real GDP, improvements with the use of time-varying parameter models appear to be fairly limited but confirm the findings obtained with constant parameter techniques. The results obtained are robust to a wide range of variant tests implemented.

Keywords: Forecasting Real GDP, Confidence Indicators, Kalman Filter

JEL Classification: C22, E27

Suggested Citation

Mourougane, Annabelle and Roma, Moreno, Can Confidence Indicators Be Useful to Predict Short Term Real GDP Growth? (March 2002). Available at SSRN: https://ssrn.com/abstract=357346 or http://dx.doi.org/10.2139/ssrn.357346

Annabelle Mourougane (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Moreno Roma

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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