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Markov-Switching and the Ifo Business Climate: the Ifo Business Cycle Traffic Lights

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  • Klaus Abberger

    ()

  • Wolfgang Nierhaus

Abstract

Business cycle indicators are used to assess the economic situation of countries or regions. They are closely watched by the public, but are not easy to interpret. Does a current movement of the indicator signal a turning point or not? With the help of Markov Switching Models movements of indicators can be transformed in probability statements. In this article, the most important leading indicator of the German business cycle, the Ifo Business Climate, is described by a Markov Switching Model. Real-time probabilities for the current business-cycle regime are derived and presented in an innovative way: as the Ifo traffi c lights. JEL Classifi cation: E32, C22 Keywords: Ifo business climate, growth cycle, turning points, Markov-switching

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File URL: http://dx.doi.org/10.1787/jbcma-2010-5km4gzqtx248
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Bibliographic Info

Article provided by OECD Publishing,CIRET in its journal OECD Journal: Journal of Business Cycle Measurement and Analysis.

Volume (Year): 2010 (2010)
Issue (Month): 2 ()
Pages: 1-13

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Handle: RePEc:oec:stdkab:5km4gzqtx248

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  1. Potter, Simon M, 1999. " Nonlinear Time Series Modelling: An Introduction," Journal of Economic Surveys, Wiley Blackwell, vol. 13(5), pages 505-28, December.
  2. Diebold, Francis X & Rudebusch, Glenn D, 1989. "Scoring the Leading Indicators," The Journal of Business, University of Chicago Press, vol. 62(3), pages 369-91, July.
  3. repec:wop:humbsf:1995-19 is not listed on IDEAS
  4. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1.
  5. Benoit Bellone, 2005. "Classical Estimation of Multivariate Markov-Switching Models using MSVARlib," Econometrics 0508017, EconWPA.
  6. Klaus Abberger & Wolfgang Nierhaus, 2007. "Das ifo Geschäftsklima und Wendepunkte der deutschen Konjunktur," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 60(03), pages 26-31, 02.
  7. repec:ces:ifosdt:v::y:2009:i::p:11-19 is not listed on IDEAS
  8. Daniel R. Smith & Allan Layton, 2007. "Comparing Probability Forecasts in Markov Regime Switching Business Cycle Models," Journal of Business Cycle Measurement and Analysis, OECD Publishing,CIRET, vol. 2007(1), pages 79-98.
  9. Goldfeld, Stephen M. & Quandt, Richard E., 1973. "A Markov model for switching regressions," Journal of Econometrics, Elsevier, vol. 1(1), pages 3-15, March.
  10. Klaus Abberger & Klaus Wohlrabe, 2006. "Einige Prognoseeigenschaften des ifo Geschäftsklimas - Ein Überblick über die neuere wissenschaftliche Literatur," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 59(22), pages 19-26, November.
  11. Klaus Abberger & Wolfgang Nierhaus, 2009. "Months for Cyclical Dominance und ifo Geschäftsklima," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 62(07), pages 11-19, 04.
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Cited by:
  1. Klaus Abberger & Wolfgang Nierhaus, 2011. "Die ifo Konjunkturuhr: Zirkulare Korrelation mit dem realen Bruttoinlandsprodukt," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer, vol. 5(3), pages 179-201, December.
  2. Christian Seiler & Klaus Wohlrabe, 2013. "Das ifo Geschäftsklima und die deutsche Konjunktur," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 66(18), pages 17-21, October.
  3. Klaus Abberger & Wolfgang Nierhaus, 2011. "Die aktuelle Wirtschaftsentwicklung im Lichte der ifo Konjunkturampel," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(22), pages 36-38, November.
  4. Klaus Abberger & Wolfgang Nierhaus, 2010. "The Ifo Business Cycle Clock: Circular Correlation with the Real GDP," CESifo Working Paper Series 3179, CESifo Group Munich.
  5. Klaus Abberger & Wolfgang Nierhaus, 2010. "Drei Monitorsysteme zur Analyse der sächsischen Industriekonjunktur," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, vol. 17(06), pages 33-39, December.

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