Please use this identifier to cite or link to this item:
Theobald, Thomas
Year of Publication: 
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: Forecasting E20-V1
This paper uses several macroeconomic and financial indicators within a Markov Switching (MS) framework to predict the turning points of the business cycle. The presented model is applied to monthly German real-time data covering the recession and the recovery after the financial crisis. We show how to take advantage of combining single MSARX forecasts with the adjusting of the number of regimes on the real-time path, which both lead to higher forecast accuracy through the non-linearity of the underlying data-generating process. Adjusting the number of regimes implies distinguishing between recessions which are either normal or extraordinary, i.e. specifically determining as early as possible the point in time from which the recession in the aftermath of the financial crisis structurally exceeded previous ones. In fact it turns out that the Markov Switching model can signal quite early whether a conventional recession will occur or whether an economic downturn will be more pronounced.
Document Type: 
Conference Paper

Files in This Item:

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.