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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))

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.

Suggested Citation

  • Konstantin A., Kholodilin, 2003. "Identifying and Forecasting the Turns of the Japanese Business Cycle," LIDAM Discussion Papers IRES 2003008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2003008
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    References listed on IDEAS

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    More about this item

    Keywords

    composite economic indicator; Markov switching; smooth transition autoregression; turning points; reference cycle; forecasting;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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