Joint Economic Forecast 2018 - 2022

The Joint Economic Forecast will be jointly drafted by the institutes listed below

• ifo Institute – Leibniz Institute for Economic Research at the University of Munich in cooperation with the KOF Business Cycle Analysis Unit at the ETH Zurich
• Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
• RWI Höhere Studien, Vienna
• Leibniz-Institut für Wirtschaftsforschung, Halle
• Institute für Weltwirtschaft at the University of Kiel

Scope and Contents of the Joint Economic Forecast

The Joint Economic Forecast analyses and forecasts the economic situation in Germany. The forecasts are conducted twice a year, with the first forecast published in spring followed by another in autumn. The Joint Economic Forecasts act as a point of reference for the forecasts made by the German federal government. The Joint Economic Forecast is a joint research project conducted by several economic research institutes. Their cooperation is characterised by a dialogue between different competing theoretical and methodical approaches, forming the best possible basis for analysis and forecasts.

All economic forecasts feature a world economic and a domestic economic section. The first section covers those international economic developments that are particularly important to a country dependent on exports like Germany. This is accompanied by a presentation of international finance policy and monetary framework conditions, which include the monetary policy pursued by US and Japanese central banks, and especially the interest rate decisions taken by the European Central Bank, the expansion of monetary supply in the euro area and developments in the euro/US dollar exchange rate.

The domestic economic section of the report features an analysis of current economic events, the key assumptions underpinning the forecast and - based on this - a commented estimate of the key indicators of Germany's national accounts (Volkswirtschaftlichen Gesamtrechnungen - VGR). The estimate particularly focuses on growth in gross domestic product (GDP), developments in public sector consumption, investments in construction and equipment, exports and imports, as well as forecasts of labour market developments, inflation and government revenues and expenditure. The forecasting horizon of the Joint Economic Forecast ranges up to 10 quarters depending on its completion date. In addition, a mid-term forecast of the German economy's growth path over the next five years is also drafted (mid-term forecast). The forecasting section is followed by a statement on the German government's economic policy. Economic policy reflections and recommendations cover the core areas of monetary and fiscal policy, as well as structural policy measures that are relevant to overall economic developments.

Methodology

The ifo Institute relies on a forecast that is rooted in survey-based economic cycle research and draws on the latest empirical methods and theoretical models. In its very short-term forecasts for the ongoing and forthcoming quarter the ifo Institute emphasizes the importance of survey-based indicators, but also considers other early indicators from sources like official statistics. It draws heavily on the ifo World Economic Survey (WES) in its forecast for the world economy and key regions. The comprehensive results of the ifo Business Survey, along with other ifo surveys, play a central role in its forecast for Germany.

In the field of forecasting methodology special consideration is given to the problem of model uncertainty in both active research and forecasting. There is a focus on the forecasting combination procedure that takes model uncertainty into account and makes it possible to efficiently use the whole range of indicators available. This approach is particularly used to estimate gross domestic product and key aggregates on both the production and the consumption sides for the ongoing and forthcoming quarters. However, a wide range of alternative models are also applied to forecasting periods beyond this date to facilitate the early identification of model flaws using counter-checks. This is achieved using various model types from time series analysis, econometrics and applied macroeconomics. As a result, a DSGE (Dynamic Stochastic General Equilibrium) model developed at the ifo Institute specifically for the German economy has now been in use for several years.

This multitude of forecasting models and analysis procedures is combined with available expert knowledge in an iteratively analytical procedure and condensed into a forecast that is consistent both in terms of its contents and calculations. This happens as part of the German national accounts and therefore has a special importance. Its further development is scientifically supported by the ifo Institute at both a national and a regional level.

Data and other Sources

German Official Statistics Office, German Bundesbank, Federal Labour Office, European Central Bank, Eurostat, IMF, OECD as well as own calculations.

Results

Joint Economic Forecast
http://www.gemeinschaftsdiagnose.de

Results were analysed in ifo Schnelldienst and released to the press. The data were also included in the National Accounts of the Federal Statistical Office.

Figures on investments in selected economic sectors can be found in the ifo Konjunkturperspektiven.