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Do Leading Indicators Really Predict Australian Business Cycle Turning Points?

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  • Layton, Allan P

Abstract

In earlier work, Layton (1994) demonstrated how Hamilton's (1991) quasi-Bayesian, Markov (constant transition probability parameters), regime-switching model could be used to characterize the nature of the Australian business cycle. However, Diebold, Lee and Weinbach (1992), Durland and McCurdy (1994), and Filardo (1994) have suggested approaches which allow the Markov transition probabilities to be non-constant. In this paper the Australian coincident index is employed as a summative measure of the business cycle and the transition probability parameters are allowed to vary. In particular, leading and long leading indexes are used as putative determinants of these transition probabilities to test whether, in this framework, these indexes systematically influence the probability of phase changes in the business cycle. Copyright 1997 by The Economic Society of Australia.

Suggested Citation

  • Layton, Allan P, 1997. "Do Leading Indicators Really Predict Australian Business Cycle Turning Points?," The Economic Record, The Economic Society of Australia, vol. 73(222), pages 258-269, September.
    • Handle: RePEc:bla:ecorec:v:73:y:1997:i:222:p:258-69
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    Cited by:

    1. Bodman, Philip M, 1998. "Asymmetry and Duration Dependence in Australian GDP and Unemployment," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 399-411, December.
    2. Sergey Smirnov, 2011. "Those Unpredictable Recessions," HSE Working papers WP BRP 02/EC/2011, National Research University Higher School of Economics.
    3. Philip Gray, 2008. "Economic significance of predictability in Australian equities," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 48(5), pages 783-805.
    4. Allan Layton & Daniel Smith, 2000. "A further note on the three phases of the US business cycle," Applied Economics, Taylor & Francis Journals, vol. 32(9), pages 1133-1143.
    5. Andrea Brischetto & Graham Voss, 2000. "Forecasting Australian Economic Activity Using Leading Indicators," RBA Research Discussion Papers rdp2000-02, Reserve Bank of Australia.
    6. Jamie Alcock & Philip Gray, 2005. "Forecasting Stock Returns Using Model-Selection Criteria," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 135-151, June.
    7. Dr Alicia Rambaldi & Bortolussi, 2004. "Interactions of Source State and Market Price Trends for Cattle of Korean, Japanese and USA Market Specifications," Discussion Papers Series 334, School of Economics, University of Queensland, Australia.

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