Dating Business Cycle Turning Points for the French Economy: a MS-DFM approach

Catherine Doz () and Anna Petronevich
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Catherine Doz: Centre d'Economie de la Sorbonne - Paris School of Economics, https://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The official institutions (NBER, OECD, CEPR and others) provide business cycle chronology with a lag from 3 months up to several years. Markov-Switching Dynamic Factor Model (MS-DFM) allows to produce the turning points more timely. The Kalman filter estimates of the model can be obtained in one step with limited number of series or in two steps on a much richer dataset. While the choice of correct series is a challenge for the one-step method, the problem of the two-step method is the potential misspecification. In this paper we apply one-step and two-step approaches to the French data and compare their performance. Both methods give qualitatively similar results and prove to reproduce the OECSD business cycle chronology on the 1993-2014 monthly sample well. We find that the two-step method is more precise in determining the beginnings and the ends of recessions. Also, both methods produce extra signals corresponding to downturns which were too short to belong to OECD chronology of recessions

Keywords: Dynamic factor models; Markov switching models; business cycle turning points (search for similar items in EconPapers)
JEL-codes: C32 C34 C55 E32 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2015-02
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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ftp://mse.univ-paris1.fr/pub/mse/CES2015/15009.pdf (application/pdf)

Related works:
Chapter: Dating Business Cycle Turning Points for the French Economy: An MS-DFM approach (2016)
Working Paper: Dating Business Cycle Turning Points for the French Economy: a MS-DFM approach (2015)
Working Paper: Dating Business Cycle Turning Points for the French Economy: a MS-DFM approach (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:15009

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