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Identifying and Forecasting the Turning Points of the Belgian Business Cycle with Regime-Switching and Logit Models

Vincent Bodart, Konstantin Kholodilin () and Fatemeh Shadman

No 2005006, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: This paper seeks to elaborate econometric models that can be used to forecast the turning points of the Belgian business cycle. We begin by suggesting three reference cycle, which we hope will fill the void of an official reference chronology for Belgium. We then construct two different types of model to estimate the probabilities of recession : Markov-switching models, and Logit models. We apply each approach to a limited set of data, which are a good representation of the economy, are available early and are subject to only minor revisions. We then select the best performing model for each chronology and type of approach. The out-of-sample results show that the models provide useful indicators of business cycle turning points. They are however far from perfect forecasting tools, especially when it comes to forecasting periods of classical recession.

Keywords: Refrence chronologies; Markov-Switching and Logit models, forecasting business cycle turning points (search for similar items in EconPapers)
JEL-codes: C5 E32 E37 (search for similar items in EconPapers)
Pages: 40
Date: 2005-03-01
New Economics Papers: this item is included in nep-bec, nep-dcm, nep-ecm, nep-ets and nep-mac
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