Resource title

Forecasting the Turns of German Business Cycle: Dynamic Bi-Factor Model with Markov Switching

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Resource description

In this paper a dynamic bi-factor model with Markov switching is proposed to measure and predict turning points of the German business cycle. It estimates simultaneously the composite leading indicator (CLI) and composite coincident indicator (CCI) together with corresponding probabilities of being in recession. According to the bi-factor model, on average, CLI leads CCI by 3 months at both peaks and troughs. The model-derived recession probabilities of CCI and those of CLI with a lag of 2?3 months capture the turning points of the ECRI?s and OECD?s reference cycle much better than the dynamic single-factor model with Markov switching.

Resource author

Konstantin Arkadievich Kholodilin

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Resource publish date

Resource language

eng

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text/html

Resource resource URL

http://hdl.handle.net/10419/18345

Resource license

Adapt according to the presented license agreement and reference the original author.