Identifying and Forecasting the Turns of the Japanese Business Cycle

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Identifying and Forecasting the Turns of the Japanese Business Cycle

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Konstantin A., Kholodilin (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

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Konstantin Arkadievich Kholodilin

Abstract

In this paper we identify and try to predict the turning points of the Japanese business cycle. As a measure of the business cycle we use a composite economic indicator (CEI). This indicator is endowed with nonlinear dynamics to capture the asymmetries between different cyclical phases. Two types of nonlinear dynamics are considered : Markov switching and smooth transition autoregression (STAR). The performance of these models in terms of forecasting the business cycle turns is compared. Both types of models produce statistically equivalent in-sample forecasting results, whilst the CEI with exponential STAR tends to outperform the CEI with Markov-switching and logistic STAR in the out-of-sample prediction.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2003008.

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Length: 30
Date of creation: 01 Jun 2003
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Handle: RePEc:ctl:louvir:2003008

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Find related papers by JEL classification:
C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
C5 - Mathematical and Quantitative Methods - - Econometric Modeling

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-03-14 (All new papers)
NEP-ECM-2004-03-14 (Econometrics)
NEP-MAC-2004-03-14 (Macroeconomics)

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Other versions:
- Simon M. Potter, 1999. "Nonlinear time series modelling: an introduction," Staff Reports 87, Federal Reserve Bank of New York. [Downloadable!]
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Other versions:
- Konstantin, KHOLODILIN, 2002. "Two Alternative Approaches to Modelling the Nonlinear Dynamics of the Composite Economic Indicator," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002027, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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