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Forecasting Macedonian business cycle turning points using Qual VAR model

Magdalena Petrovska (), Aneta Krstevska and Nikola Naumovski ()
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Magdalena Petrovska: National Bank of the Republic of Macedonia
Nikola Naumovski: National Bank of the Republic of Macedonia

No 2016-05, Working Papers from National Bank of the Republic of North Macedonia

Abstract: This paper aims to assess the usefulness of leading indicators in business cycle research and forecast. Initially we test the predictive power of the ESI within a static probit model as a leading indicator, commonly perceived to be able to provide a reliable summary of the current economic conditions. We further proceed by analyzing how well an extended set of indicators performs in forecasting turning points of the Macedonian business cycle by employing the Qual VAR approach of Dueker (2005). In continuation, we evaluate the quality of the selected indicators in pseudo-out-of-sample context. The results show that the use of survey-based indicators as a complement to macroeconomic data work satisfactory well in capturing the business cycle developments in Macedonia.

Keywords: Forecasting; Business cycle turning points; Qual VAR; MCMC; Latent variable (search for similar items in EconPapers)
JEL-codes: C22 C25 F42 (search for similar items in EconPapers)
Pages: 18
Date: 2016-11
New Economics Papers: this item is included in nep-for, nep-mac and nep-tra
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