Scandinavian Working Papers in Economics

Nationaløkonomisk tidsskrift,
Nationaløkonomisk Forening

Makroøkonomiske forudsigelser baseret på diffusionsindeks

2005, Volume 2005, issue 1, pp. 125-152

Christian Dahl (), Henrik Hansen () and John Smidt ()
Additional contact information
Christian Dahl: Purdue University, Postal: 610 Purdue Mall, West Lafayette, IN 47907, USA
Henrik Hansen: Økonomisk Institut, Københavns Universitet, Postal: Øster Farimagsgade 5, 1353 København, Danmark
John Smidt: Det Økonomiske Råds Sekretariat, Postal: Landgreven 4, 1300 København, Danmark

Abstract: This paper presents simulated out-of-sample forecasts based on diffusion indexes for monthly Danish macroeconomic data. The diffusion indexes are derived from 246 series (172 monthly and 74 quarterly series). The primary focus is on forecasts of unemployment, industrial turnover and inflation at horizons of 6, and 12 months over the period 1995-2003. It is shown that it is possible to obtain mean squared forecast errors (MSFE) of diffusion index forecasts that are smaller than the MSFE of a standard autoregressive model. However, the gain in forecasting accuracy is not robust as the results are very sensitive to the specification of the forecasting equation. As it is difficult to establish general rules with respect to the parameterization of the forecasting equation this poses a serious problem in real time forecasts. Thus, the basic results based on Danish data are not as good as has been seen in the literature. The disappointing results are probably related to very volatile estimates of the diffusion indexes. Based on this observation, a possible improvement is suggested, namely calculation of the diffusion indexes on the basis of filtered data. Results based on this idea seem much more promising than the basic setting. Using filtered data the diffusion index model leads to a reduction of MSFE of around 10 to 15 per cent relative to a standard autoregressive model.

Keywords: makroøkonomi; diffusionsindeks

JEL-codes: A10

Language: Danish

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