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Predicting U.S. Business Cycle Turning Points Using Real-Time Diffusion Indexes Based on a Large Data Set

Herman Stekler and Yongchen Zhao ()

No 2016-006, Working Papers from The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting

Abstract: This paper considers the issue of predicting cyclical turning points using real-time diffusion indexes constructed using a large data set from March 2005 to September 2014. We construct diffusion indexes at the monthly frequency, compare several smoothing and signal extraction methods, and evaluate predictions based on the indexes. Our finding suggest that diffusion indexes are still effective tools in predicting turning points. Using diffusion indexes, along with good judgement, one would have successfully predicted or at least identified the 2008 recession in real time.

Pages: 30 pages
Date: 2016-09
New Economics Papers: this item is included in nep-mac
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https://www2.gwu.edu/~forcpgm/2016-006.pdf First version, 2016 (application/pdf)

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Working Paper: Predicting U.S. Business Cycle Turning Points Using Real-Time Diffusion Indexes Based on a Large Data Set (2016) Downloads
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