Advanced Search
MyIDEAS: Login to save this paper or follow this series

Combination schemes for turning point predictions

Contents:

Author Info

  • Monica Billio

    (University of Venice, GRETA Assoc. and School for Advanced Studies in Venice)

  • Roberto Casarin

    ()
    (University of Venice, GRETA Assoc. and School for Advanced Studies in Venice)

  • Francesco Ravazzolo

    (Norges Bank (Central Bank of Norway) and BI Norwegian Business School)

  • Herman K. van Dijk

    (Econometric Institute, Erasmus University Rotterdam and VU University Amsterdam and Tinbergen Institute)

Abstract

We propose new forecast combination schemes for predicting turning points of business cycles. The combination schemes deal with the forecasting performance of a given set of models and possibly providing better turning point predictions. We consider turning point predictions generated by autoregressive (AR) and Markov-Switching AR models, which are commonly used for business cycle analysis. In order to account for parameter uncertainty we consider a Bayesian approach to both estimation and prediction and compare, in terms of statistical accuracy, the individual models and the combined turning point predictions for the United States and Euro area business cycles.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2012/WP-201204/
Download Restriction: no

Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2012/04.

as in new window
Length: 30 pages
Date of creation: 10 Apr 2012
Date of revision:
Handle: RePEc:bno:worpap:2012_04

Contact details of provider:
Postal: Postboks 1179 Sentrum, 0107 Oslo
Phone: +47 22 31 60 00
Fax: +47 22 41 31 05
Email:
Web page: http://www.norges-bank.no/
More information through EDIRC

Related research

Keywords: Turning Points; Markov-switching; Forecast Combination; Bayesian Model Averaging;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Hilde C. Bjørnland & Karsten R. Gerdrup & Anne Sofie Jore & Leif Anders Thorsrud & Christie Smith, 2010. "Does forecast combination improve Norges Bank inflation forecasts?," Working Papers 0002, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
  2. Lennart Hoogerheide & Richard Kleijn & Francesco Ravazzolo & Herman K. van Dijk & Marno Verbeek, 2009. "Forecast accuracy and economic gains from Bayesian model averaging using time varying weight," Working Paper 2009/10, Norges Bank.
  3. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  4. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, December.
  5. Diebold, Francis X & Rudebusch, Glenn D, 1996. "Measuring Business Cycles: A Modern Perspective," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 67-77, February.
  6. Mark W. Watson, 1992. "Business Cycle Durations and Postwar Stabilization of the U.S. Economy," NBER Working Papers 4005, National Bureau of Economic Research, Inc.
  7. Billio Monica & Casarin Roberto, 2011. "Beta Autoregressive Transition Markov-Switching Models for Business Cycle Analysis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 15(4), pages 1-32, September.
  8. Fabio Canova & Matteo Ciccarelli, 1999. "Forecasting and turning point predictions in a Bayesian panel VAR model," Economics Working Papers 443, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Monica Billio & Jacques Anas & Laurent Ferrara & Marco Lo Duca, 2007. "Business Cycle Analysis with Multivariate Markov Switching Models," Working Papers 2007_32, Department of Economics, University of Venice "Ca' Foscari".
  10. Gary Koop & Markus Jochmann & Rodney W. Strachan, 2008. "Bayesian Forecasting using Stochastic Search Variable Selection in a VAR Subject to Breaks," Working Paper Series 19-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
  11. Clements, Michael P. & Harvey, David I., 2011. "Combining probability forecasts," International Journal of Forecasting, Elsevier, vol. 27(2), pages 208-223, April.
  12. Chang-Jin Kim & Jeremy M. Piger, 2001. "Common stochastic trends, common cycles, and asymmetry in economic fluctuations," Working Papers 2001-014, Federal Reserve Bank of St. Louis.
  13. Monica Billio & Jacques Anas & Laurent Ferrara & Marco Lo Duca, 2007. "A turning point chronology for the Euro-zone," Working Papers 2007_33, Department of Economics, University of Venice "Ca' Foscari".
  14. Michael Dueker, 2004. "Non-Markovian Regime Switching with Endogenous States and Time-Varying State Strengths," Econometric Society 2004 Latin American Meetings 34, Econometric Society.
  15. Monica Billio & Roberto Casarin & Francesco Ravazzolo & Herman K. van Dijk, 2011. "Combining Predictive Densities using Nonlinear Filtering with Applications to US Economics Data," Tinbergen Institute Discussion Papers 11-172/4, Tinbergen Institute.
  16. J. Vermaak & C. Andrieu & A. Doucet & S. J. Godsill, 2004. "Reversible Jump Markov Chain Monte Carlo Strategies for Bayesian Model Selection in Autoregressive Processes," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(6), pages 785-809, November.
  17. Christopher A. Sims, 1988. "Bayesian skepticism on unit root econometrics," Discussion Paper / Institute for Empirical Macroeconomics 3, Federal Reserve Bank of Minneapolis.
  18. J. Michael Durland & Thomas H. McCurdy, 1993. "Duration Dependent Transitions in a Markov Model of U.S. GNP Growth," Working Papers 887, Queen's University, Department of Economics.
  19. Hamilton, James D., 2011. "Calling recessions in real time," International Journal of Forecasting, Elsevier, vol. 27(4), pages 1006-1026, October.
  20. Koop, Gary & Osiewalski, Jacek & Steel, Mark F. J., 1995. "Bayesian long-run prediction in time series models," Journal of Econometrics, Elsevier, vol. 69(1), pages 61-80, September.
  21. Andrew Ang & Geert Bekaert, 1998. "Regime Switches in Interest Rates," NBER Working Papers 6508, National Bureau of Economic Research, Inc.
  22. Geweke, John & Whiteman, Charles, 2006. "Bayesian Forecasting," Handbook of Economic Forecasting, Elsevier.
  23. Francq, C. & Zakoian, J. -M., 2001. "Stationarity of multivariate Markov-switching ARMA models," Journal of Econometrics, Elsevier, vol. 102(2), pages 339-364, June.
  24. Simon M. Potter, 1993. "A Nonlinear Approach to U.S. GNP," UCLA Economics Working Papers 693, UCLA Department of Economics.
  25. L. Wasserman, 2000. "Asymptotic inference for mixture models by using data-dependent priors," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 62(1), pages 159-180.
  26. Rodney Strachan & Herman K. van Dijk, 2012. "Evidence on Features of a DSGE Business Cycle Model from Bayesian Model Averaging," Tinbergen Institute Discussion Papers 12-025/4, Tinbergen Institute.
  27. Peter C.B. Phillips, 1991. "Bayesian Routes and Unit Roots: de rebus prioribus semper est disputandum," Cowles Foundation Discussion Papers 986, Cowles Foundation for Research in Economics, Yale University.
  28. Daniel E. Sichel, 1989. "Business cycle duration dependence: a parametric approach," Working Paper Series / Economic Activity Section 98, Board of Governors of the Federal Reserve System (U.S.).
  29. Kim, Chang-Jin, 1994. "Dynamic linear models with Markov-switching," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 1-22.
  30. Christopher A. Sims & Harald Uhlig, 1988. "Understanding unit rooters: a helicopter tour," Discussion Paper / Institute for Empirical Macroeconomics 4, Federal Reserve Bank of Minneapolis.
  31. Michael P. Clements & Hans-Martin Krolzig, 1998. "A comparison of the forecast performance of Markov-switching and threshold autoregressive models of US GNP," Econometrics Journal, Royal Economic Society, vol. 1(Conferenc), pages C47-C75.
  32. Massimo Guidolin, 2011. "Markov Switching Models in Empirical Finance," Working Papers 415, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  33. Terui, Nobuhiko & van Dijk, Herman K., 2002. "Combined forecasts from linear and nonlinear time series models," International Journal of Forecasting, Elsevier, vol. 18(3), pages 421-438.
  34. Massimiliano Caporin & Domenico Sartore, 2006. "Methodological aspects of time series back-calculation," Working Papers 2006_56, Department of Economics, University of Venice "Ca' Foscari".
  35. Jacques Anas & Monica Billio & Laurent Ferrara & Gian Luigi Mazzi, 2008. "A System For Dating And Detecting Turning Points In The Euro Area," Manchester School, University of Manchester, vol. 76(5), pages 549-577, 09.
  36. Chang-Jin Kim & Christian J. Murray, 2002. "Permanent and transitory components of recessions," Empirical Economics, Springer, vol. 27(2), pages 163-183.
  37. Monica Billio & Roberto Casarin, 2010. "Identifying business cycle turning points with sequential Monte Carlo methods: an online and real-time application to the Euro area," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 145-167.
  38. Rodney Strachan & Herman K. van Dijk, 2012. "Evidence on Features of a DSGE Business Cycle Model from Bayesian Model Averaging," Tinbergen Institute Discussion Papers 12-025/4, Tinbergen Institute.
  39. Zellner, Arnold & Hong, Chansik & Min, Chung-ki, 1991. "Forecasting turning points in international output growth rates using Bayesian exponentially weighted autoregression, time-varying parameter, and pooling techniques," Journal of Econometrics, Elsevier, vol. 49(1-2), pages 275-304.
  40. Hans-Martin Krolzig, 2000. "Predicting Markov-Switching Vector Autoregressive Processes," Economics Series Working Papers 2000-W31, University of Oxford, Department of Economics.
  41. Jeremy J. Nalewaik, 2012. "Estimating Probabilities of Recession in Real Time Using GDP and GDI," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(1), pages 235-253, 02.
  42. Goldfeld, Stephen M. & Quandt, Richard E., 1973. "A Markov model for switching regressions," Journal of Econometrics, Elsevier, vol. 1(1), pages 3-15, March.
  43. Mönch, Emanuel & Uhlig, Harald, 2004. "Towards a Monthly Business Cycle Chronology for the Euro Area," CEPR Discussion Papers 4377, C.E.P.R. Discussion Papers.
  44. Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1 National Bureau of Economic Research, Inc.
  45. Monica Billio & Roberto Casarin & Francesco Ravazzolo & Herman K. van Dijk, 2011. "Combining Predictive Densities using Nonlinear Filtering with Applications to US Economics Data," Tinbergen Institute Discussion Papers 11-172/4, Tinbergen Institute.
  46. 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, June.
  47. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
  48. James H. Stock & Mark W. Watson, 2010. "Indicators for Dating Business Cycles: Cross-History Selection and Comparisons," American Economic Review, American Economic Association, vol. 100(2), pages 16-19, May.
  49. John Geweke, 1998. "Using simulation methods for Bayesian econometric models: inference, development, and communication," Staff Report 249, Federal Reserve Bank of Minneapolis.
  50. Min, Chung-ki & Zellner, Arnold, 1993. "Bayesian and non-Bayesian methods for combining models and forecasts with applications to forecasting international growth rates," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 89-118, March.
  51. Chauvet, Marcelle & Piger, Jeremy, 2008. "A Comparison of the Real-Time Performance of Business Cycle Dating Methods," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 42-49, January.
  52. McCulloch, Robert E. & Tsay, Ruey S., 1994. "Bayesian Inference of Trend and Difference-Stationarity," Econometric Theory, Cambridge University Press, vol. 10(3-4), pages 596-608, August.
  53. Albert, James H & Chib, Siddhartha, 1993. "Bayes Inference via Gibbs Sampling of Autoregressive Time Series Subject to Markov Mean and Variance Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 1-15, January.
  54. Filardo, Andrew J, 1994. "Business-Cycle Phases and Their Transitional Dynamics," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 299-308, July.
  55. de Pooter, M.D. & Ravazzolo, F. & Segers, R. & van Dijk, H.K., 2008. "Bayesian near-boundary analysis in basic macroeconomic time series models," Econometric Institute Research Papers EI 2008-13, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Knut Are Aastveit & Anne Sofie Jore & Francesco Ravazzolo, 2014. "Forecasting recessions in real time," Working Paper 2014/02, Norges Bank.
  2. Shaun P Vahey & Elizabeth C Wakerly, 2013. "Moving towards probability forecasting," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and inflation dynamics in Asia and the Pacific, volume 70, pages 3-8 Bank for International Settlements.
  3. Federico Bassetti & Roberto Casarin & Fabrizio Leisen, 2013. "Beta-Product Dependent Pitman-Yor Processes for Bayesian Inference," Working Papers 2013:13, Department of Economics, University of Venice "Ca' Foscari".
  4. Pauwels, Laurent & Vasnev, Andrey, 2013. "Forecast combination for U.S. recessions with real-time data," Working Papers 13 BAWP, University of Sydney Business School, Discipline of Business Analytics.
  5. Monica Billio & Roberto Casarin & Francesco Ravazzolo & Herman K. van Dijk, 2013. "Interactions between eurozone and US booms and busts: A Bayesian panel Markov-switching VAR model," Working Paper 2013/20, Norges Bank.
  6. Monica Billio & Roberto Casarin & Francesco Ravazzolo & Herman K. van Dijk, 2013. "Interactions between Eurozone and US Booms and Busts: A Bayesian Panel Markov-switching VAR Model," Tinbergen Institute Discussion Papers 13-142/III, Tinbergen Institute.
  7. Roberto Casarin & Marco Tronzano & Domenico Sartore, 2013. "Bayesian Markov Switching Stochastic Correlation Models," Working Papers 2013:11, Department of Economics, University of Venice "Ca' Foscari".
  8. Huang, MeiChi, 2014. "Bubble-like housing boom–bust cycles: Evidence from the predictive power of households’ expectations," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 2-16.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bno:worpap:2012_04. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.