Forecasting recessions in real time

Knut Are Aastveit, Anne Sofie Jore () and Francesco Ravazzolo
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Anne Sofie Jore: Norges Bank (Central Bank of Norway), http://www.norges-bank.no/

No 2014/02, Working Paper from Norges Bank

Abstract: We review several methods to define and forecast classical business cycle turning points in Norway. In the paper we compare the Bry - Boschan rule (BB) with a Markov Switching model (MS), using alternative vintages of Norwegian Gross Domestic Product (GDP) as the business cycle indicator. The timing of business cycles depends on the vintage and the method used. BB provides the most reasonable definition of business cycles. The forecasting exercise, where the models are augmented with surveys or financial indicators, respectively, leads to the conclusion that the BB rule applied to density forecasts of GDP augmented with either the consumer confidence index or a financial conditions index provides the most timely predictions of peaks. For troughs, augmenting with surveys or financial indicators does not increase forecastability.

Keywords: Forecast densities; Turning points; Real-time data (search for similar items in EconPapers)
JEL-codes: C32 C52 C53 E37 E52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014-02-13
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2014_02

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