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Prediction of Business Cycle Turning Points in Germany

  • Ulrich Fritsche


    (DIW Berlin)

  • Vladimir Kuzin


    (Universitaet Frankfurt)

Using a binary reference series based on the dating procedure of Artis, Kontolemis and Osborn (1997) different procedures for predicting turning points of the German business cycles were tested. Specifically, a probit model as proposed by Estrella and Mishkin (1997) as well as Markov-switching models were taken into consideration. The overall results indicate that the interest rate spread, the real effective exchange rate as well as some monetary indicators and some survey indicators can help to predict turning points of the German business cycle. The models were estimated for the in-sample period 1978 to 1997 and the reliability of the results was tested out of the sample (1998 to 2002)

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Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 225 (2005)
Issue (Month): 1 (January)
Pages: 22-43

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Handle: RePEc:jns:jbstat:v:225:y:2005:i:1:p:22-43
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  1. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
  2. Estrella, Arturo, 1998. "A New Measure of Fit for Equations with Dichotomous Dependent Variables," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 198-205, April.
  3. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May.
  4. Stock, J.H. & Watson, M.W., 1989. "New Indexes Of Coincident And Leading Economic Indicators," Papers 178d, Harvard - J.F. Kennedy School of Government.
  5. Bernard, Henri & Gerlach, Stefan, 1998. "Does the Term Structure Predict Recessions? The International Evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(3), pages 195-215, July.
  6. Francis X. Diebold & Jose A. Lopez, 1996. "Forecast Evaluation and Combination," NBER Technical Working Papers 0192, National Bureau of Economic Research, Inc.
  7. Ulrich Fritsche & Sabine Stephan, 2002. "Leading Indicators of German Business Cycles - An Assessment of Properties," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 222(3), pages 289-315.
  8. Döpke, Jörg & Langfeldt, Enno, 1995. "Zur Qualität von Konjunkturprognosen für Westdeutschland 1976 - 1994," Kiel Discussion Papers 247, Kiel Institute for the World Economy (IfW).
  9. Michael J. Dueker, 1997. "Strengthening the case for the yield curve as a predictor of U.S. recessions," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 41-51.
  10. 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.
  11. Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 533-540, May.
  12. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, December.
  13. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, vol. 41(7), pages 1375-1401, July.
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