| Article ID: | iaor1998198 |
| Country: | Netherlands |
| Volume: | 13 |
| Issue: | 2 |
| Start Page Number: | 211 |
| End Page Number: | 222 |
| Publication Date: | Apr 1997 |
| Journal: | International Journal of Forecasting |
| Authors: | Funke Michael |
| Keywords: | forecasting: applications |
Data on West Germany manufacturing output and producer prices are analysed to extract information on underlying demand and supply shocks. Identification is achieved using long-run restrictions, based on a theoretical model. The main results are that both demand and supply shocks are important in explaining German business cycles from 1965 to 1993. Finally, the structural VAR gap measures are compared with alternative univariate gap measures and it is shown that the predictability range of inflation could be enhanced when alternative output gap measures are combined.