Ruhr Economic Papers

Ruhr Economic Papers #539

Weather, the Forgotten Factor in Business Cycle Analyses

by Roland Döhrn and Philipp an de Meulen

RWI, 02/2015, 26 S./p., 8 Euro, ISBN 978-3-86788-617-8 DOI: 10.4419/86788617

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Abstract

In periods of unusual weather, forecasters face a problem of interpreting economic data: Which part goes back to the underlying economic trend and which part arises from a special weather effect? In this paper, we discuss ways to disentangle weather-related from business cycle-related influences on economic indicators. We find a significant influence of weather variables at least on a number of monthly indicators. Controlling for weather effects within these indicators should thus create opportunities to increase the accuracy of indicator-based forecasts. Focusing on quarterly GDP growth in Germany, we find that the accuracy of the RWI short term forecasting model improves but advances are small and not significant.

JEL-Classification: C53, E37

Keywords: Weather; short term forecasting; bridge equations; forecast accuracy

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