Assessing Predictive Content of the KOF Barometer in Real Time

Abstract

We investigate whether the KOF Barometer-a leading indicator regularly released by the KOF Swiss Economic Institute-can be useful for short-term out-of-sample prediction of year-on-year quarterly real GDP growth rates in Switzerland. We find that the KOF Barometer appears to be useful for prediction of GDP growth rates. Even the earliest forecasts, made seven months ahead of the first official GDP estimate, allow us to predict GDP growth rates more accurately than forecasts based on an univariate autoregressive model. At every subsequent forecast round as new monthly releases of the KOF Barometer become available we observe a steady increase in forecast accuracy.