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Dating and forecasting turning points by Bayesian clustering with dynamic structure: A suggestion with an application to Austrian data

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Author Info
Sylvia Kaufmann (Oesterreichische Nationalbank, Economic Studies Division, P.O. Box 61, A-1010 Vienna,)

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Abstract

The information contained in a large panel data set is used to date historical turning points of the Austrian business cycle and to forecast future ones. We estimate groups of series with similar time series dynamics and link the groups with a dynamic structure. The dynamic structure identifies a group of leading and a group of coincident series. Robust results across data vintages are obtained when series specific information is incorporated in the design of the prior group probability distribution. The results are consistent with common expectations, in particular the group of leading series includes Austrian confidence indicators and survey data, German survey indicators, some trade data, and, interestingly, the Austrian and the German stock market indices. The forecast evaluation confirms that the Markov switching panel with dynamic structure performs well when compared to other specifications.

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Publisher Info
Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 144.

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Length: 49 pages
Date of creation: 19 Jun 2008
Date of revision:
Handle: RePEc:onb:oenbwp:144

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Postal: P.O. Box 61, A-1011 Vienna, Austria
Phone: +43/1/404 20 7205
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Postal: Oesterreichische Nationalbank, Economic Studies Division, c/o Beate Hofbauer-Berlakovich, POB 61, A-1011 Vienna, Austria
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Related research
Keywords: Bayesian clustering parameter heterogeneity latent dynamic structure Markov switching panel data turning points.

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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  1. Canova, Fabio & Ciccarelli, Matteo, 2004. "Forecasting and turning point predictions in a Bayesian panel VAR model," Journal of Econometrics, Elsevier, vol. 120(2), pages 327-359, June. [Downloadable!] (restricted)
    Other versions:
  2. Phillips, Kerk L., 1991. "A two-country model of stochastic output with changes in regime," Journal of International Economics, Elsevier, vol. 31(1-2), pages 121-142, August. [Downloadable!] (restricted)
  3. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. Forni, Mario, et al, 2001. "Coincident and Leading Indicators for the Euro Area," Economic Journal, Royal Economic Society, vol. 111(471), pages C62-85, May. [Downloadable!] (restricted)
  6. Sylvia Kaufmann & Sylvia Frühwirth-Schnatter, 2006. "How do changes in monetary policy affect bank lending? An analysis of Austrian bank data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(3), pages 275-305. [Downloadable!]
  7. Giancarlo Bruno & Claudio Lupi, 2004. "Forecasting industrial production and the early detection of turning points," Empirical Economics, Springer, vol. 29(3), pages 647-671, 09. [Downloadable!] (restricted)
    Other versions:
  8. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000. "The Generalized Dynamic-Factor Model: Identification And Estimation," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 540-554, November. [Downloadable!] (restricted)
    Other versions:
  9. Chib, Siddhartha, 1996. "Calculating posterior distributions and modal estimates in Markov mixture models," Journal of Econometrics, Elsevier, vol. 75(1), pages 79-97, November. [Downloadable!] (restricted)
  10. Pesaran, M. Hashem & Timmermann, Allan, 2007. "Selection of estimation window in the presence of breaks," Journal of Econometrics, Elsevier, vol. 137(1), pages 134-161, March. [Downloadable!] (restricted)
  11. Fruhwirth-Schnatter, Sylvia & Kaufmann, Sylvia, 2008. "Model-Based Clustering of Multiple Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 78-89, January. [Downloadable!] (restricted)
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  12. 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. [Downloadable!] (restricted)
    Other versions:
  13. Filardo, Andrew J. & Gordon, Stephen F., 1998. "Business cycle durations," Journal of Econometrics, Elsevier, vol. 85(1), pages 99-123, July. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2008-11-17.

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