Inflation Puzzles, the Phillips Curve and Output Expectations: New Perspectives from the Euro Zone
Alessandro Sardone, Roberto Tamborini, Giuliana Passamani
Empirica,
forthcoming
Abstract
Confidence in the Phillips Curve (PC) as predictor of inflation developments along the business cycle has been shaken by recent “inflation puzzles” in advanced countries, such as the “missing disinflation” in the aftermath of the Great Recession and the “missing inflation” in the years of recovery, to which the Euro-Zone “excess deflation” during the post-crisis depression may be added. This paper proposes a newly specified Phillips Curve model, in which expected inflation, instead of being treated as an exogenous explanatory variable of actual inflation, is endogenized. The idea is simply that if the PC is used to foresee inflation, then its expectational component should in some way be the result of agents using the PC itself. As a consequence, the truly independent explanatory variables of inflation turn out to be the output gaps and the related forecast errors by agents, with notable empirical consequences. The model is tested with the Euro-Zone data 1999–2019 showing that it may provide a consistent explanation of the “inflation puzzles” by disentangling the structural component from the expectational effects of the PC.
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Energy Markets and Global Economic Conditions
Christiane Baumeister, Dimitris Korobilis, Thomas K. Lee
Review of Economics and Statistics,
forthcoming
Abstract
We evaluate alternative indicators of global economic activity and other market funda-mentals in terms of their usefulness for forecasting real oil prices and global petroleum consumption. World industrial production is one of the most useful indicators. However, by combining measures from several different sources we can do even better. Our analysis results in a new index of global economic conditions and measures for assessing future energy demand and oil price pressures. We illustrate their usefulness for quantifying the main factors behind the severe contraction of the global economy and the price risks faced by shale oil producers in early 2020.
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14.09.2021 • 23/2021
Production bottlenecks delay recovery
The German recovery made good progress over the summer 2021. However, bottlenecks in sea transport and the production of intermediate goods are weighing on world trade. The rise in raw material prices has prompted inflation rates to spike, and an increase in new infections is clouding the outlook again. A weak final quarter is therefore to be expected. The Halle Institute for Economic Research (IWH) forecasts that German gross domestic product (GDP) will increase by 2.2% in 2021 and 3.6% in 2022 (East Germany: 1.8% and 2.8%).
Oliver Holtemöller
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Konjunktur aktuell: Produktionsengpässe verzögern Erholung
Konjunktur aktuell,
No. 3,
2021
Abstract
Im Sommer 2021 dürfte die weltwirtschaftliche Produktion deutlich zugelegt haben, aber Schließungen von Produktionsanlagen und Häfen vergrößern den Stau im globalen Warenaustausch. Ansteigende Rohstoffpreise schlagen sich v. a. in den USA und im Euroraum in hohen Inflationsraten nieder, doch die Notenbanken werden sich mit dem Kurswechsel Zeit lassen. Dadurch erhält die Wirtschaft in den westlichen Industrieländern weiter Rückenwind seitens der Wirtschaftspolitik. Die Erholung der deutschen Wirtschaft kam im Sommerhalbjahr dank der Impfkampagne und des privaten Konsums gut voran. Wegen steigender Corona-Neuinfektionen und Produktionsengpässen ist dennoch nur mit einem recht schwachen Jahresschlussquartal zu rechnen. Das BIP wird 2021 um 2,2% und 2022 um 3,6% zunehmen.
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IWH-Flash-Indikator III. Quartal und IV. Quartal 2021
Katja Heinisch, Oliver Holtemöller, Axel Lindner, Birgit Schultz
IWH Flash Indicator,
No. 3,
2021
Abstract
Zu Beginn des zweiten Quartals 2021 wurde die wirtschaftliche Erholung durch die dritte Corona-Welle gebremst. Dennoch stieg das Bruttoinlandsprodukt um 1,5%. Allerdings bestanden Angebotsrestriktionen für Dienstleistungen in einigen Bereichen fort. Weil die Corona-Impfquote mittlerweile recht weit vorangeschritten ist, könnten diese Restriktionen aufgehoben werden. Es gibt aber auch Hinweise, dass die Impfungen weniger wirksam sein könnten als erhofft. Außerdem nehmen die Infektionszahlen mit Verbreitung der Delta-Variante wieder zu, was die Aussichten für den Herbst erneut eintrübt. Zudem hemmen in der gewerblichen Wirtschaft weiterhin Lieferketten- und Beschaffungsprobleme, welche zu steigenden Einkaufspreisen führen, die Produktion. Die Wirtschaft in Deutschland dürfte laut IWH-Flash-Indikator im dritten Quartal 2021 um 1,0% expandieren und im vierten Quartal um 0,1% leicht zurückgehen (vgl. Abbildung 1).
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A Comparison of Monthly Global Indicators for Forecasting Growth
Christiane Baumeister, Pierre Guérin
International Journal of Forecasting,
No. 3,
2021
Abstract
This paper evaluates the predictive content of a set of alternative monthly indicators of global economic activity for nowcasting and forecasting quarterly world real GDP growth using mixed-frequency models. It shows that a recently proposed indicator that covers multiple dimensions of the global economy consistently produces substantial improvements in forecasting accuracy, while other monthly measures have more mixed success. Specifically, the best-performing model yields impressive gains with MSPE reductions of up to 34% at short horizons and up to 13% at long horizons relative to an autoregressive benchmark. The global economic conditions indicator also contains valuable information for assessing the current and future state of the economy for a set of individual countries and groups of countries. This indicator is used to track the evolution of the nowcasts for the U.S., the OECD area, and the world economy during the COVID-19 pandemic and the main factors that drive the nowcasts are quantified.
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06.07.2021 • 18/2021
IWH Bankruptcy Update: June Data Incomplete – Small Forecasted Increase in Bankruptcies
Despite incomplete June data, the month-over-month increase in German corporate bankruptcies is projected to be small. Furthermore, the increase is largely attributable to the higher number of business days in June, according to the IWH Bankruptcy Report, which is published by the Halle Institute for Economic Research (IWH) and provides a monthly update on German bankruptcy statistics.
Steffen Müller
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15.06.2021 • 16/2021
Increase in personal contacts spurs economic activity
This summer the economic outlook in Germany is bright. As the pandemic is in retreat, the restrictions that have hampered many service activities are likely to be gradually lifted, and a strong boost in private purchases can be expected. The Halle Institute for Economic Research (IWH) forecasts that gross domestic product will increase by 3.9% in 2021 and by 4.0% in 2022. Production in East Germany is expected to increase by 3% in both years, respectively.
Oliver Holtemöller
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Konjunktur aktuell: Zurück ins Leben – Zunahme persönlicher Kontakte beflügelt wirtschaftliche Aktivität
Konjunktur aktuell,
No. 2,
2021
Abstract
Im Sommer 2021 expandiert die weltwirtschaftliche Produktion kräftig, hauptsächlich dank rasch voranschreitender Impfkampagnen in den fortgeschrittenen Volkswirtschaften des Westens. Geld- und Finanzpolitik bleiben dort expansiv, und die konjunkturelle Dynamik wird auch in den kommenden Quartalen hoch sein. In vielen Schwellen- und Entwicklungsländern wird die Pandemie hingegen das ganze Jahr 2021 über noch auf der Wirtschaft lasten. In Deutschland sind die konjunkturellen Aussichten günstig, weil die Corona-Restriktionen nach und nach aufgehoben werden. Das BIP wird 2021 um 3,9% und 2022 um 4,0% zunehmen. Die Produktion in Ostdeutschland dürfte in beiden Jahren um jeweils 3% zulegen.
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Conditional Macroeconomic Forecasts: Disagreement, Revisions and Forecast Errors
Alexander Glas, Katja Heinisch
IWH Discussion Papers,
No. 7,
2021
Abstract
Using data from the European Central Bank‘s Survey of Professional Forecasters, we analyse the role of ex-ante conditioning variables for macroeconomic forecasts. In particular, we test to which extent the heterogeneity, updating and ex-post performance of predictions for inflation, real GDP growth and the unemployment rate are related to assumptions about future oil prices, exchange rates, interest rates and wage growth. Our findings indicate that inflation forecasts are closely associated with oil price expectations, whereas expected interest rates are used primarily to predict output growth and unemployment. Expectations about exchange rates and wage growth also matter for macroeconomic forecasts, albeit less so than oil prices and interest rates. We show that survey participants can considerably improve forecast accuracy for macroeconomic outcomes by reducing prediction errors for external conditions. Our results contribute to a better understanding of the expectation formation process of experts.
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