Markov-switching dynamic factor models in real time

Maximo Camacho, Gabriel Perez-Quiros and Pilar Poncela
Authors registered in the RePEc Author Service: Gabriel Perez Quiros

International Journal of Forecasting, 2018, vol. 34, issue 4, 598-611

Abstract: We extend the Markov-switching dynamic factor model to account for some of the specificities of the day-to-day monitoring of economic developments from macroeconomic indicators, such as mixed sampling frequencies and ragged-edge data. First, we evaluate the theoretical gains of using data that are available promptly for computing probabilities of recession in real time. Second, we show how to estimate the model that deals with unbalanced panels of data and mixed frequencies, and examine the benefits of this extension through several Monte Carlo simulations. Finally, we assess its empirical reliability for the computation of real-time inferences of the US business cycle, and compare it with the alternative method of forecasting the probabilities of recession from balanced panels.

Keywords: Business cycles; Output growth; Time series (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (29)

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Related works:
Working Paper: Markov-switching dynamic factor models in real time (2012)
Working Paper: Markov-switching dynamic factor models in real time (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:34:y:2018:i:4:p:598-611

DOI: 10.1016/j.ijforecast.2018.05.002

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