Testing Predicitive Ability of Business Cycle Indicators for the Euro Area

We analyze the predictive power of seven leading indicators for economic activity inthe Euro Area developed by different banks, institutions and research centers. Ourcomparison is conducted in a bivariate vector autoregressive framework. Indicators arecompared by means of an in-sample and an out-of-sample forecasting experiment.Predictive accuracy is compared by recently proposed tests for superior predictive ability.Our results suggest that nearly all indicators have good in-sample properties and that amajority of them is able to outperform a naive univariate autoregressive model out-of-sample.Additionally, we find that indicators perform better in boom periods than inrecessions. The OECD and FAZ indicators are both composite indicators and deliver themost accurate forecasts.Leading indicators, Euro area, forecasting

Exchange Rate Regime and Wage Determination in Central and Eastern Europe

After the eastern enlargement of the European Union due to increasing labor market integration, wage determination and monetary integration in Central and Eastern Europe have become key issues in European economic policy making. Based on the Scandinavian model of wage adjustment by Lindbeck (1979), we intend to analyze the role of exchange rates in the wage determination process of the Central and Eastern European countries to identify which exchange rate strategy contributes to faster wage convergence in Europe. Panel estimations reveal a robust negative relationship between exchange rates and wage growth. This suggests that workers in countries with fixed exchange rates are likely to benefit from higher wage increases.wage policy, labor markets, exchange rate regime, Central and Eastern Europe

How good are dynamic factor models at forecasting output and inflation? A meta-analytic approach

This paper surveys existing factor forecast applications for real economic activity and inflation by means of a meta-analysis and contributes to the current debate on the determinants of the forecast performance of large-scale dynamic factor models relative to other models. We find that, on average, factor forecasts are slightly better than other models' forecasts. In particular, factor models tend to outperform small-scale models, whereas they perform slightly worse than alternative methods which are also able to exploit large datasets. Our results further suggest that factor forecasts are better for US than for UK macroeconomic variables, and that they are better for US than for euro-area output; however, there are no significant differences between the relative factor forecast performance for US and euro-area inflation. There is also some evidence that factor models are better suited to predict output at shorter forecast horizons than at longer horizons. These findings all relate to the forecasting environment (which cannot be influenced by the forecasters). Among the variables capturing the forecasting design (which can, by contrast, be influenced by the forecasters), the size of the dataset from which factors are extracted seems to positively affect the relative factor forecast performance. There is some evidence that quarterly data lend themselves better to factor forecasts than monthly data. Rolling forecasts are preferable to recursive forecasts. The factor estimation technique seems to matter as well. Other potential determinants - namely whether forecasters rely on a balanced or an unbalanced panel, whether restrictions implied by the factor structure are imposed in the forecasting equation or not and whether an iterated or a direct multi-step forecast is made - are found to be rather irrelevant. Moreover, we find no evidence that pre-selecting the variables to be included in the panel from which factors are extracted helped to improve factor forecasts in the past. --Factor models,forecasting,meta-analysis

Predictive Ability of Business Cycle Indicators under Test: A Case Study for the Euro Area Industrial Production

In this paper we assess the information content of seven widely cited early indicators for the euro area with respect to forecasting area-wide industrial production. To this end, we use various tests that are designed to compare competing forecast models. In addition to the standard Diebold-Mariano test, we employ tests that account for specific problems typically encountered in forecast exercises. Specifically, we pay attention to nested model structures, we alleviate the problem of data snooping arising from multiple pairwise testing, and we analyze the structural stability in the relative forecast performance of one indicator compared to a benchmark model. Moreover, we consider loss functions that overweight forecast errors in booms and recessions to check whether a specific indicator that appears to be a good choice on average is also preferable in times of economic stress. We find that on average three indicators have superior forecast ability, namely the EuroCoin indicator, the OECD composite leading indicator, and the FAZ-Euro indicator published by the Frankfurter Allgemeine Zeitung. If one is interested in one-month forecasts only, the business climate indicator of the European Commission yields the smallest errors. However, the results are not completely invariant against the choice of the loss function. Moreover, rolling local tests reveal that the indicators are particularly useful in times of unusual changes in industrial production while the simple autoregressive benchmark is difficult to beat during time of average production growth

Testing Predicitive Ability of Business Cycle Indicators for the Euro Area

We analyze the predictive power of seven leading indicators for economic activity inthe Euro Area developed by different banks, institutions and research centers. Ourcomparison is conducted in a bivariate vector autoregressive framework. Indicators arecompared by means of an in-sample and an out-of-sample forecasting experiment.Predictive accuracy is compared by recently proposed tests for superior predictive ability.Our results suggest that nearly all indicators have good in-sample properties and that amajority of them is able to outperform a naive univariate autoregressive model out-of-sample.Additionally, we find that indicators perform better in boom periods than inrecessions. The OECD and FAZ indicators are both composite indicators and deliver themost accurate forecasts

Predictive Ability of Business Cycle Indicators under Test: A Case Study for the Euro Area Industrial Production

In this paper we assess the information content of seven widely cited early indicators for the euro area with respect to forecasting area-wide industrial production. To this end, we use various tests that are designed to compare competing forecast models. In addition to the standard Diebold-Mariano test, we employ tests that account for specific problems typically encountered in forecast exercises. Specifically, we pay attention to nested model structures, we alleviate the problem of data snooping arising from multiple pairwise testing, and we analyze the structural stability in the relative forecast performance of one indicator compared to a benchmark model. Moreover, we consider loss functions that overweight forecast errors in booms and recessions to check whether a specific indicator that appears to be a good choice on average is also preferable in times of economic stress. We find that there is not one best indicator that uniformly dominates all its competitors. The optimal choice rather depends on the specific forecast situation and the loss function of the user. For 1-month forecasts the business climate indicator of the European Commission and the OECD composite leading indicator generally work well, for 6-month forecasts the OECD composite leading indicator performs very good by all criteria, and for 12-month forecasts the FAZ-Euro indicator published by the Frankfurter Allgemeine Zeitung is the only one that can beat the benchmark AR(1) model.weighted loss, leading indicators, euro area, forecasting

Exchange rate regime and wage determination in Central and Eastern Europe

After the eastern enlargement of the European Union due to increasing labor market integration, wage determination and monetary integration in Central and Eastern Europe have become key issues in European economic policy making. Based on the Scandinavian model of wage adjustment by Lindbeck (1979), we intend to analyze the role of exchange rates in the wage determination process of the Central and Eastern European countries to identify which exchange rate strategy contributes to faster wage convergence in Europe. Panel estimations reveal a robust negative relationship between exchange rates and wage growth. This suggests that workers in countries with fixed exchange rates are likely to benefit from higher wage increases

Leseanforderungen im Kontext beruflicher Arbeit als Ausgangspunkt für die Entwicklung adressatenspezifischer integrierter Konzepte zur Förderung von Lesestrategien

Eine unzureichende Lesekompetenz vieler Berufsschüler/innen wird durch verschiedene Studien nachgewiesen (z.B. PISA, ULME I). Auch ein Zusammenhang zwischen Lesekompetenz und berufsfachlicher Kompetenzentwicklung ist erkennbar. Gleichzeitig führen nach dem Konzept des Reciprocal Teaching durchgeführte Interventionen zur Förderung der Lesekompetenz im Berufsschulunterricht, sowie auch andere Fördermaßnahmen, kaum zu den erhofften positiven Effekten. Eine weitere Untersuchung zur Wirksamkeit des Reciprocal Teaching-Ansatzes in Kleingruppen stützt die Vermutung, dass u.a. die problematische motivationale Einstellung der Schüler/innen zum Lesen der Wirksamkeit von Fördermaßnahmen entgegensteht. Offensichtlich gelingt es kaum, Schüler/innen die Relevanz von Lesekompetenz im beruflichen Kontext zu verdeutlichen. Sinnvoll scheint [den Autoren] daher, die Entwicklung von Interventionskonzepten, die von beruflichen Leseanforderungen ausgehen, um damit den Aspekt der subjektiven Bedeutsamkeit von Lerninhalten noch stärker zu gewichten. Der vorliegende Aufsatz skizziert zunächst Konzepte zur Leseförderung für die berufliche Bildung. Im Zentrum stehen Befunde einer Ergänzungsstudie zu Reciprocal Teaching in gewerblich-technischen Bildungsgängen, woraus weiterer Forschungsbedarf im Kontext von Lesekompetenzförderung abgeleitet, im Rahmen einer Projektskizze konkretisiert wird und erste Befunde berichtet werden. (DIPF/Orig.

Monetary policy under alternative exchange rate regimes in Central and Eastern Europe

Monetary policy in CEE is an important determinant in the wage bargaining process, because trade unions have to predict inflation as one component of future real wages. This paper scrutinizes whether countries in CEE that officially announce an inflation target are tempted to act time-inconsistently and switch from the announced inflation target to an exchange rate target in order to sustain higher output via surprise inflation. If market participants discover the time-inconsistency, they will adjust their inflation expectations, which result in higher average rates of price increases. The time-inconsistent behavior in central bank interest rate setting is modeled by several Taylor rules. An empirical application provides evidence that some monetary authorities in CEE such as the Czech Republic and Slovakia have acted timeinconsistent and have focused on the exchange rate in periods of official inflation targeting, which might have contributed to higher average rates of inflation and welfare losses. Furthermore, uncertainty in wage determination process has risen due to a harder predictability of productivity and inflation as components of future nominal wages

Exchange Rate Stability and Wage Determination in Central and Eastern Europe: Exchange Rate Stability and Wage Determination in Central and Eastern Europe

In Folge der Osterweiterung der europäischen Union (EU) und der steigenden Arbeitsmarktintegration zwischen den EU15 und den neuen Mitgliedsstaaten ist die Lohnfindung in Mittel- und Osteuropa zu einem Schwerpunkt der europäischer Wirtschaftspolitik geworden. Zugleich wird das optimale Wechselkursregime für mittel- und osteuropäische Staaten kontrovers diskutiert. Die Dissertation befasst sich mit der Fragestellung, welche Wechselkursstrategie in Mittel- und Osteuropa vorzuziehen ist, um zum einen den Lohnfindungsprozess zu optimieren und zum anderen den Anpassungsprozess (Konvergenzprozess) an europäische Lohnstandards zu beschleunigen. Diese kumulierte Arbeit besteht aus vier unabhängigen Fachaufsätzen. Zuerst wird der Frage nachgegangen, welche Wechselkursstrategie einen optimalen Rahmen für die Lohnsetzung während des Aufholprozesses mittel- und osteuropäischer Staaten ermöglicht (Kapitel zwei). Im Kapitel drei wird die Rolle der Geldpolitik in Bezug auf die Lohnfindung in Staaten mit flexiblen Wechselkursen untersucht. Die Evaluierung der Prognosefähigkeit alternativer Konjunkturindikatoren für die Euro Zone sowie deren Implikationen für den Lohnverhandlungsprozess in Mittel-und Osteuropa ist Gegenstand der Analyse in Kapitel vier. Im fünften Kapitel wird der Rolle der Lohnpolitik auf Leistungsbilanz(un)gleichgewichte in Mittel- und Osteuropa nachgegangen.After the Eastern enlargement of the European Union (EU) and increasing participation of labor between the EU15 and the new member states, wage determination in Central and Eastern Europe (CEE) has become a key issue in European economic policy making. At the same time there are controversial discussions regarding the appropriate exchange rate regime for the CEE countries. In this thesis it is examined which exchange rate strategy provides a more favorable framework for wage setting in CEE and leads to faster wage convergence in Europe. This thesis has four parts. First, it is analyzed which exchange rate strategy provides a more favorable framework for wage setting during the economic catch-up process of CEE (section two). Second, the role of monetary policy in wage determination in countries with flexible exchange rate regimes is examined in section three. Third, the predictive power of different euro area business cycle indicators is analyzed in section four. Fourth, the impact of wage determination on the balance of payments in CEE is scrutinized (section five)