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

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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

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  • 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," Documents de travail du Centre d'Economie de la Sorbonne 09053, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:09053
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    File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2009/09053.pdf
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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

    Business cycle; Euro zone; Markov switching model; SETAR mpdel; unemployment; industrial production;

    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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