Brüggemann, Ralf Lütkepohl, Helmut Marcellino, Massimiliano
Year of Publication:
SFB 649 Discussion Paper 2006,065
It is investigated whether Euro-area variables can be forecast better based on synthetic time series for the pre-Euro period or by using just data from Germany for the pre-Euro period. Our forecast comparison is based on quarterly data for the period 1970Q1 - 2003Q4 for ten macroeconomic variables. The years 2000 - 2003 are used as forecasting period. A range of different univariate forecasting methods is applied. Some of them are based on linear autoregressive models and we also use some nonlinear or time-varying coefficient models. It turns out that most variables which have a similar level for Germany and the Euro-area such as prices can be better predicted based on German data while aggregated European data are preferable for forecasting variables which need considerable adjustments in their levels when joining German and EMU data. These results suggest that for variables which have a similar level for Germany and the Euro-area it may be reasonable to consider the German pre-EMU data for studying economic problems in the Euro-area.
Aggregation forecasting European monetary union constructing EMU data