Econometric Tools for Macroeconomic Forecasting and Simulation

The aim of this research group is to enhance research on, and development, implementation, evaluation, and application of quantitative macroeconometric models for forecasting and analysing aggregate economic fluctuations and developments. Research in this group contributes to the econometric foundation and the methodological improvements of the IWH forecasts. During the last years, the IWH has highly specialised in macroeconomic modelling, both for flash estimates and medium-term projections. Furthermore, this group conducts comprehensive empirical analysis and develops econometric tools that are used for third-party funded projects. In the last years, particular models have been developed for e.g. Volkswagen Financial Services AG and for GIZ. The research group contributed in particular on macroeconomic modelling for ministries in Kyrgyzstan and Tajikistan as well as for the institute of forecasting and macroeconomic research (IFMR) Uzbekistan.

IWH Data Project: IWH Real-time Database

Research Cluster
Economic Dynamics and Stability

Your contact

Dr Katja Heinisch
Dr Katja Heinisch
- Department Macroeconomics
Send Message +49 345 7753-836 LinkedIn profile

EXTERNAL FUNDING

07.2022 ‐ 12.2026

Evaluation of the InvKG and the federal STARK programme

On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI are evaluating the use of the approximately 40 billion euros the federal government is providing to support the coal phase-out regions..

See project page

Professor Dr Oliver Holtemöller

01.2023 ‐ 12.2023

Early determination of stable results for gross domestic product or real economic growth and gross value added at federal state level

The project examines whether the accuracy of the first estimate of gross value added and gross domestic product for the federal states can be increased, thereby reducing the extent of subsequent revisions.

 See project page

Professor Dr Oliver Holtemöller

01.2018 ‐ 12.2023

EuropeAid (EU Framework Contract)

Professor Dr Oliver Holtemöller

05.2020 ‐ 09.2023

ENTRANCES: Energy Transitions from Coal and Carbon: Effects on Societies

ENTRANCES aims at examining the effects of the coal phase-out in Europe. How does the phase-out transform society – and what can politics do about it?

see project's webpage

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 883947.

Dr Katja Heinisch
Professor Dr Oliver Holtemöller

10.2019 ‐ 01.2023

Climate Resilient Economic Development

Climate change has a substantial impact on economic growth and a country’s development. This increases the need for reliable and viable approaches to assessing the impact of climate risks and potential adaptation scenarios. Political decision-makers in ministries of planning and economy need sound forecasts in order to design and finance adequate economic policy instruments and actively to take countermeasures. In the pilot countries (Georgia, Kazakhstan and Vietnam), climate risk is included in macroeconomic modelling, enabling the results to be integrated into the policy process so as to facilitate adapted economic planning. The IWH team is responsible for macroeconomic modelling in Vietnam.

see project's page on GIZ website

Dr Katja Heinisch

07.2016 ‐ 12.2018

Climate Protection and Coal Phaseout: Political Strategies and Measures up to 2030 and beyond

Dr Katja Heinisch

01.2017 ‐ 12.2017

Support to Sustainable Economic Development in Selected Regions of Uzbekistan

Dr Andrej Drygalla

01.2017 ‐ 12.2017

Short-term Macroeconomic Forecasting Model in Ministry of Economic Development and Trade of Ukraine

Dr Andrej Drygalla

01.2016 ‐ 12.2017

Development of analytical tools based on Input-Output table

The aim of the project was the development of an analytical tool to assess the gains and losses of possible state programs supporting the development of the private sector of the Tajik economy.

Dr Katja Heinisch

11.2015 ‐ 12.2016

Employment and Development in the Republic of Uzbekistan

Support to sustainable economic development in selected regions of Uzbekistan

Dr Katja Heinisch

05.2016 ‐ 05.2016

Framework and Finance for Private Sector Development in Tajikistan

Dr Katja Heinisch

02.2016 ‐ 04.2016

Macroeconomic Reforms and Green Growth - Assessment of economic modelling capacity in Vietnam

Dr Katja Heinisch

Refereed Publications

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Bottom-up or Direct? Forecasting German GDP in a Data-rich Environment

Katja Heinisch Rolf Scheufele

in: Empirical Economics, No. 2, 2018

Abstract

In this paper, we investigate whether there are benefits in disaggregating GDP into its components when nowcasting GDP. To answer this question, we conduct a realistic out-of-sample experiment that deals with the most prominent problems in short-term forecasting: mixed frequencies, ragged-edge data, asynchronous data releases and a large set of potential information. We compare a direct leading indicator-based GDP forecast with two bottom-up procedures—that is, forecasting GDP components from the production side or from the demand side. Generally, we find that the direct forecast performs relatively well. Among the disaggregated procedures, the production side seems to be better suited than the demand side to form a disaggregated GDP nowcast.

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The European Refugee Crisis and the Natural Rate of Output

Katja Heinisch Klaus Wohlrabe

in: Applied Economics Letters, No. 16, 2017

Abstract

The European Commission follows a harmonized approach for calculating structural (potential) output for EU member states that takes into account labour as an important ingredient. This article shows how the recent huge migrants’ inflow to Europe affects trend output. Due to the fact that the immigrants immediately increase the working population but effectively do not enter the labour market, we illustrate that the potential output is potentially upward biased without any corrections. Taking Germany as an example, we find that the average medium-term potential growth rate is lower if the migration flow is modelled adequately compared to results based on the unadjusted European Commission procedure.

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Impulse Response Analysis in a Misspecified DSGE Model: A Comparison of Full and Limited Information Techniques

Sebastian Giesen Rolf Scheufele

in: Applied Economics Letters, No. 3, 2016

Abstract

In this article, we examine the effect of estimation biases – introduced by model misspecification – on the impulse responses analysis for dynamic stochastic general equilibrium (DSGE) models. Thereby, we use full and limited information estimators to estimate a misspecified DSGE model and calculate impulse response functions (IRFs) based on the estimated structural parameters. It turns out that IRFs based on full information techniques can be unreliable under misspecification.

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Effects of Incorrect Specification on the Finite Sample Properties of Full and Limited Information Estimators in DSGE Models

Sebastian Giesen Rolf Scheufele

in: Journal of Macroeconomics, June 2016

Abstract

In this paper we analyze the small sample properties of full information and limited information estimators in a potentially misspecified DSGE model. Therefore, we conduct a simulation study based on a standard New Keynesian model including price and wage rigidities. We then study the effects of omitted variable problems on the structural parameter estimates of the model. We find that FIML performs superior when the model is correctly specified. In cases where some of the model characteristics are omitted, the performance of FIML is highly unreliable, whereas GMM estimates remain approximately unbiased and significance tests are mostly reliable.

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Testing for Structural Breaks at Unknown Time: A Steeplechase

Makram El-Shagi Sebastian Giesen

in: Computational Economics, No. 1, 2013

Abstract

This paper analyzes the role of common data problems when identifying structural breaks in small samples. Most notably, we survey small sample properties of the most commonly applied endogenous break tests developed by Brown et al. (J R Stat Soc B 37:149–163, 1975) and Zeileis (Stat Pap 45(1):123–131, 2004), Nyblom (J Am Stat Assoc 84(405):223–230, 1989) and Hansen (J Policy Model 14(4):517–533, 1992), and Andrews et al. (J Econ 70(1):9–38, 1996). Power and size properties are derived using Monte Carlo simulations. We find that the Nyblom test is on par with the commonly used F type tests in a small sample in terms of power. While the Nyblom test’s power decreases if the structural break occurs close to the margin of the sample, it proves far more robust to nonnormal distributions of the error term that are found to matter strongly in small samples although being irrelevant asymptotically for all tests that are analyzed in this paper.

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Working Papers

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Outperforming IMF Forecasts by the Use of Leading Indicators

Katja Drechsel Sebastian Giesen Axel Lindner

in: IWH Discussion Papers, No. 4, 2014

Abstract

This study analyzes the performance of the IMF World Economic Outlook forecasts for world output and the aggregates of both the advanced economies and the emerging and developing economies. With a focus on the forecast for the current and the next year, we examine whether IMF forecasts can be improved by using leading indicators with monthly updates. Using a real-time dataset for GDP and for the indicators we find that some simple single-indicator forecasts on the basis of data that are available at higher frequency can significantly outperform the IMF forecasts if the publication of the Outlook is only a few months old.

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A Federal Long-run Projection Model for Germany

Oliver Holtemöller Maike Irrek Birgit Schultz

in: IWH Discussion Papers, No. 11, 2012

Abstract

Many economic decisions implicitly or explicitly rely on a projection of the medium- or long-term economic development of a country or region. In this paper, we provide a federal long-run projection model for Germany and the German states. The model fea-tures a top-down approach and, as major contribution, uses error correction models to estimate the regional economic development dependent on the national projection. For the medium- and long-term projection of economic activity, we apply a production function approach. We provide a detailed robustness analysis by systematically varying assumptions of the model. Additionally, we explore the effects of different demographic trends on economic development.

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Does Central Bank Staff Beat Private Forecasters?

Makram El-Shagi Sebastian Giesen A. Jung

in: IWH Discussion Papers, No. 5, 2012

Abstract

In the tradition of Romer and Romer (2000), this paper compares staff forecasts of the Federal Reserve (Fed) and the European Central Bank (ECB) for inflation and output with corresponding private forecasts. Standard tests show that the Fed and less so the ECB have a considerable information advantage about inflation and output. Using novel tests for conditional predictive ability and forecast stability for the US, we identify the driving forces of the narrowing of the information advantage of Greenbook forecasts coinciding with the Great Moderation.

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Is East Germany Catching Up? A Time Series Perspective

Bernd Aumann Rolf Scheufele

in: IWH Discussion Papers, No. 14, 2009

Abstract

This paper assesses whether the economy of East Germany is catching up with the West German region in terms of welfare. While the primary measure for convergence and catching up is per capita output, we also look at other macroeconomic indicators such as unemployment rates, wage rates, and production levels in the manufacturingsector. In contrast to existing studies of convergence between regions of reunified Germany, our approach is purely based upon the time series dimension and is thus directly focused on the catching up process in East Germany as a region. Our testing setup includes standard ADF unit root tests as well as unit root tests that endogenously allow for a break in the deterministic component of the process. In our analysis, we find evidence of catching up for East Germany for most of the indicators. However, convergence speed is slow, and thus it can be expected that the catching up process will take further decades until the regional gap is closed.

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Workplace Equipment and Workplace Gap by Gender in East and West Germany

Hans-Ulrich Brautzsch Johann Fuchs Cornelia Lang

in: IWH Discussion Papers, No. 9, 2006

Abstract

In dem vorliegenden Aufsatz werden (a) Umfang und Struktur der vorhandenen Arbeitsplätze nach Geschlechtern in Ost- und Westdeutschland, (b) das geschlechtsspezifische Ausmaß der „Arbeitplatzlücke“ in beiden Großregionen sowie (c) die Ursachen für die – gemessen an Westdeutschland – höhere „Arbeitsplatzlücke“ in Ostdeutschland auf der Grundlage von Daten der Regionalen Volkswirtschaftlichen Gesamtrechnungen und der Bundesgentur für Arbeit untersucht. Die Analyse zeigt, dass im Jahr 2003 die „Arbeitsplatzausstattung“ je 1000 Erwerbsfähigen in Ostdeutschland fast genau so hoch war wie in Westdeutschland. Bei den Frauen lag sie sogar über dem westdeutschen Vergleichswert. Dennoch ist die Diskrepanz zwischen dem Arbeitsangebot und der Nachfrage bei den ostdeutschen Frauen und Männern erheblich größer. Dies ist zum einen auf strukturelle Ursachen und zum anderen auf die höhere Erwerbsneigung der ostdeutschen Frauen zurückzuführen, die insbesonde durch das tradierte Verhaltensmuster nach Erwerbsarbeit sowie die geringeren Haushalteinkommen in Ostdeutschland bedingt ist.

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