Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/220207 
Year of Publication: 
2015
Series/Report no.: 
Discussion Paper No. 118
Publisher: 
Institute for Applied Economic Research (ipea), Brasília
Abstract: 
This paper compares the forecasting performance of linear and nonlinear models under the presence of structural breaks for the Brazilian real GDP growth. The Markov switching models proposed by Hamilton (1989) and its generalized version by Lam (1990) are applied to quarterly GDP from 1975:1 to 2000:2 allowing for breaks at the Collor Plans. The probabilities of recessions are used to analyze the Brazilian business cycle. The ability of each model in forecasting out-of-sample the growth rates of GDP is examined. The forecasting ability of the two models is also compared with linear specifications. We find that nonlinear models display the best forecasting performance and that specifications including the presence of structural breaks are important in obtaining a representation of the Brazilian business cycle.
Document Type: 
Working Paper

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