Econometric Tools for Macroeconomic Forecasting and Simulation

This research group advances the development and application of quantitative macroeconometric models to improve the accuracy, transparency, and policy relevance of macroeconomic forecasts and simulations. Its work supports the empirical and methodological foundation of the IWH’s forecasting activities and policy recommendations.

The group focuses on both short-term forecasting and simulation-based assessments of long-term economic developments, with particular attention to the interactions between economic activity and the environment. Key areas of expertise include reduced-form models for short-term forecasting, regional disaggregation of macroeconomic trends, structural forecasting techniques, and Dynamic Stochastic General Equilibrium (DSGE) models for scenario analysis.

In addition to its core research, the group develops customized forecasting tools and conducts applied analyses in third-party funded projects. Recent collaborations include model development for Volkswagen Bank, economic ministries in Central Asia (supported by GIZ), the German Environment Agency (UBA), and the EU Horizon 2020 project ENTRANCES, which addresses clean energy transitions in European regions.

By integrating rigorous econometric methods with practical applications, the group contributes to a better understanding of macroeconomic dynamics and enhances the basis for evidence-based policy decisions at national and international levels.

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

German Federal Ministry for Economic Affairs and Climate Action

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

12.2024 ‐ 02.2026

Macroeconomic Modelling for Energy Investments in Vietnam

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Dr Katja Heinisch

08.2024 ‐ 03.2025

Strengthening Public Financial Management in Vietnam

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Dr Katja Heinisch

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

Landesbetrieb Information und Technik Nordrhein-Westfalen

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)

Europäische Kommission

Professor Dr Oliver Holtemöller

05.2020 ‐ 09.2023

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

Europäische Kommission

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.

Professor Dr Oliver Holtemöller
Dr Katja Heinisch

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

10.2015 ‐ 03.2016

Improved Evidence-based Policy Making - GIZ Tadschikistan

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Dr Katja Heinisch

Refereed Publications

cover_energy.jpg

Coal Phase-out in Germany – Implications and Policies for Affected Regions

Pao-Yu Oei Hauke Hermann Philipp Herpich Oliver Holtemöller Benjamin Lünenbürger Christoph Schult

in: Energy, April 2020

Abstract

The present study examines the consequences of the planned coal phase-out in Germany according to various phase-out pathways that differ in the ordering of power plant closures. Soft-linking an energy system model with an input-output model and a regional macroeconomic model simulates the socio-economic effects of the phase-out in the lignite regions, as well as in the rest of Germany. The combination of two economic models offers the advantage of considering the phase-out from different perspectives and thus assessing the robustness of the results. The model results show that the lignite coal regions will exhibit losses in output, income and population, but a faster phase-out would lead to a quicker recovery. Migration to other areas in Germany and demographic changes will partially compensate for increasing unemployment, but support from federal policy is also necessary to support structural change in these regions.

read publication

cover_empirical-economics.jpg

Nowcasting East German GDP Growth: a MIDAS Approach

João Carlos Claudio Katja Heinisch Oliver Holtemöller

in: Empirical Economics, No. 1, 2020

Abstract

Economic forecasts are an important element of rational economic policy both on the federal and on the local or regional level. Solid budgetary plans for government expenditures and revenues rely on efficient macroeconomic projections. However, official data on quarterly regional GDP in Germany are not available, and hence, regional GDP forecasts do not play an important role in public budget planning. We provide a new quarterly time series for East German GDP and develop a forecasting approach for East German GDP that takes data availability in real time and regional economic indicators into account. Overall, we find that mixed-data sampling model forecasts for East German GDP in combination with model averaging outperform regional forecast models that only rely on aggregate national information.

read publication

cover_german-economic-review.jpg

Should Forecasters Use Real‐time Data to Evaluate Leading Indicator Models for GDP Prediction? German Evidence

Katja Heinisch Rolf Scheufele

in: German Economic Review, No. 4, 2019

Abstract

In this paper, we investigate whether differences exist among forecasts using real‐time or latest‐available data to predict gross domestic product (GDP). We employ mixed‐frequency models and real‐time data to reassess the role of surveys and financial data relative to industrial production and orders in Germany. Although we find evidence that forecast characteristics based on real‐time and final data releases differ, we also observe minimal impacts on the relative forecasting performance of indicator models. However, when obtaining the optimal combination of soft and hard data, the use of final release data may understate the role of survey information.

read publication

cover_historical-social-research.gif

Expectation Formation, Financial Frictions, and Forecasting Performance of Dynamic Stochastic General Equilibrium Models

Oliver Holtemöller Christoph Schult

in: Historical Social Research, No. 2, Special Issue: Governing by Numbers 2019

Abstract

In this paper, we document the forecasting performance of estimated basic dynamic stochastic general equilibrium (DSGE) models and compare this to extended versions which consider alternative expectation formation assumptions and financial frictions. We also show how standard model features, such as price and wage rigidities, contribute to forecasting performance. It turns out that neither alternative expectation formation behaviour nor financial frictions can systematically increase the forecasting performance of basic DSGE models. Financial frictions improve forecasts only during periods of financial crises. However, traditional price and wage rigidities systematically help to increase the forecasting performance.

read publication

cover_applied-economics-letters.jpg

For How Long Do IMF Forecasts of World Economic Growth Stay Up-to-date?

Katja Heinisch Axel Lindner

in: Applied Economics Letters, No. 3, 2019

Abstract

This study analyses the performance of the International Monetary Fund (IMF) World Economic Outlook output forecasts for the world and for both the advanced economies and the emerging and developing economies. With a focus on the forecast for the current year and the next year, we examine the durability of IMF forecasts, looking at how much time has to pass so that IMF forecasts can be improved by using leading indicators with monthly updates. Using a real-time data set for GDP and for 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 as soon as the publication of the IMF’s Outlook is only a few months old. In particular, there is an obvious gain using leading indicators from January to March for the forecast of the current year.

read publication

Working Papers

cover_DP_2017-33.jpg

Progressive Tax-like Effects of Inflation: Fact or Myth? The U.S. Post-war Experience

Matthias Wieschemeyer Bernd Süssmuth

in: IWH Discussion Papers, No. 33, 2017

Abstract

Inflation and earnings growth can push some tax payers into higher brackets in the absence of inflation-indexed schedules. Moreover, inflation may affect the composition of individuals’ income sources. As a result, depending on the relative tax burden of labour and capital, inflation may decrease or increase the difference between before-tax and after-tax income. However, whether some and if so which percentiles of the income distribution net benefit from inflation via taxation is a widely unexplored question. We make use of a novel dataset on U.S. pre-tax and post-tax income distribution series provided by Pike ty et al. (2018) for the years 1962 to 2014 to answer this question. To this end, we estimate local projections to quantify dynamic effects. We find that inflation shocks increase progressivity of taxation not only contemporaneously but also with some repercussion of several years after the shock. While particularly the bottom two quintiles gain in share, it is not the top but the fourth quintile that lastingly loses.

read publication

Cover_IWH-Discussion-Papers_2016.jpg

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.

read publication

Cover_IWH-Discussion-Papers_2016.jpg

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.

read publication

Cover_IWH-Discussion-Papers_2016.jpg

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.

read publication

Cover_IWH-Discussion-Papers_2016.jpg

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.

read publication
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoSupported by the BMWK