Working Paper
In Search of Leading Indicators of Economic Activity in Germany
Harm Bandholz, Michael Funke
CESifo, Munich, 2001
CESifo Working Paper No. 571
CESifo, Munich, 2001
CESifo Working Paper No. 571
In this paper we present two new composite leading indicators of economic activity in Germany estimated using a dynamic factor model with and without regime switching. The obtained optimal inferences of business cycle turning points indicate that the two-state regime switching procedure leads to a successful representation of the sample data and provides an appropriate tool for forecasting business conditions.
Keywords: business cycles, leading indicators, turning points, Markov, switching, Germany