EconPapers    
Economics at your fingertips  
 

Predicting Ordinary and Severe Recessions with a Three-State Markov-Switching Dynamic Factor Model. An Application to the German Business Cycle

Markus Heinrich, Kai Carstensen (), Magnus Reif () and Maik Wolters

Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association

Abstract: We use a Markow-switching dynamic factor model with three states for Germany with indicators selected by the Elastic Net. The states represent expansions, normal - and severe recessions. Adding a third state helps to identify all business cycle turning points in-sample and in real-time. Combining the factor and the recession probabilities with a GDP forecasting model yields accurate nowcasts and a correct prediction of the timing of the Great Recession and its recovery one quarter in advance.

JEL-codes: C53 E32 E37 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-eec, nep-for, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/168206/1/VfS-2017-pid-3164.pdf (application/pdf)

Related works:
Working Paper: Predicting Ordinary and Severe Recessions with a Three-State Markov-Switching Dynamic Factor Model. An Application to the German Business Cycle (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc17:168206

Access Statistics for this paper

More papers in Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2020-01-18
Handle: RePEc:zbw:vfsc17:168206