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Evaluation of Nonlinear time-series models for real-time business cycle analysis of the Euro area

Author

Listed:
  • Monica Billio

    () (Università Ca' Foscari of Venice - Department of Economics)

  • Laurent Ferrara

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, DGEI-DAMEP - Banque de France)

  • Dominique Guegan

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)

  • Gian Luigi Mazzi

    () (Eurostat - Office Statistique des Communautés Européennes)

Abstract

In this paper, we aim at assessing Markov-switching and threshold models in their ability to identify turning points of economic cycles. By using vintage data that are updated on a monthly basis, we compare their ability to detect ex-post the occurrence of turning points of the classical business cycle, we evaluate the stability over time of the signal emitted by the models and assess their ability to detect in real-time recession signals. In this respect, we have built an historical vintage database for the Euro area going back to 1970 for two monthly macroeconomic variables of major importance for short-term economic outlook, namely the Industrial Production Index and the Unemployment Rate.

Suggested Citation

  • Monica Billio & Laurent Ferrara & Dominique Guegan & Gian Luigi Mazzi, 2009. "Evaluation of Nonlinear time-series models for real-time business cycle analysis of the Euro area," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00423890, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00423890
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00423890
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    Cited by:

    1. 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.
    2. Peter Martey Addo & Monica Billio & Dominique Guegan, 2012. "Studies in Nonlinear Dynamics and Wavelets for Business Cycle Analysis," Documents de travail du Centre d'Economie de la Sorbonne 12023r, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Nov 2013.

    More about this item

    Keywords

    industrial production; Business cycle; Euro zone; Markov switching model; SETAR model; unemployment; industrial production.; Cycle d'activité; zone Euro; modèle de Markov Switching; modèle à seuil; chômage; production industrielle.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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