Business cycle dating and forecasting with real-time Swiss GDP data

Christian Glocker and Philipp Wegmueller

Empirical Economics, 2020, vol. 58, issue 1, No 5, 73-105

Abstract: Abstract We develop a small-scale dynamic factor model for the Swiss economy allowing for nonlinearities by means of a two-state Markov chain. The selection of an appropriate set of indicators utilizes a combinatorial algorithm. The model’s forecasting performance is as good as that of peers with richer dynamics. It proves particularly useful for a timely assessment of the business cycle stance, as the recessionary regime probabilities tend to have a leading property. The model successfully anticipated the downturn of the 2008–2009 recession and promptly indicated a fall in GDP growth following the discontinuation of the exchange rate floor of the Swiss Franc.

Keywords: Dynamic factor model; Nowcasting; Real-time data; Markov-switching; Business cycle dating (search for similar items in EconPapers)
JEL-codes: C32 C53 E37 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Working Paper: Business Cycle Dating and Forecasting with Real-time Swiss GDP Data (2017)
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DOI: 10.1007/s00181-019-01666-9

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