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- Title
Constructing a Markov-switching Turning Point Index Using Mixed Frequencies with an Application to French Business Survey Data.
- Authors
Bardaji, José; Clavel, Laurent; Tallet, Frédéric
- Abstract
This paper proposes an indicator for detecting business cycle turning points incorporating mixed frequency business survey data. It is based on a hidden Markov-switching model and allows for the detection of regime changes in a given economy where information is displayed monthly, bimonthly and quarterly. Adapting existing indicators such as Hamilton (1989) and Gregoir and Lenglart (2000) to this frequency mix constitutes the main contribution of the present work. The proposed methodology is applied to the French economy. Using balances from different business surveys, this indicator measures the probability of being in an accelerating or a decelerating phase. The indicator is compared over the past with a reference dating established upon the business cycle component of GDP extracted by a Christiano-Fitzgerald jilter. It exhibits quite clearly and timely regime changes of the French outlook. In this case the mixed frequency methodology adapted from Gregoir and Lenglart yields better performance than the Hamilton-based indicator. Considering the adequacy with the reference dating over the past, the French turning point index (FPI) provides an accurate signal on the current outlook.
- Subjects
FRANCE; FRENCH economy, 1995-; BUSINESS cycles; ECONOMIC indicators; BUSINESS forecasting; HIDDEN Markov models; GROSS domestic product
- Publication
OECD Journal: Journal of Business Cycle Measurement & Analysis, 2009, Vol 2009, Issue 2, p111
- ISSN
1995-2880
- Publication type
Article