Ifo Short-Term Forecasting Methods Illustrated Using Investment in Equipment

Business cycle forecasts are a key reference and basis for argumentation in corporate and state planning. Using investment in equipment as an example, this article shows the approach to forecasting a demand component of German GDP. The forecast covers both the current and the forthcoming year and is conducted in two steps. Firstly the short-term forecast is made for the current and forthcoming quarter. It is characterized by the fact that information in the form of indicators is already available for this period. The remaining period is forecast using econometric structuring models, whereby dynamic characteristics of the time series concerned and the various reference time series are updated.