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Econometric Analysis and Prediction of Recurrent Events

Author

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  • Adrian Pagan

    (School of Economics, University of Sydney)

  • Don Harding

    (School of Economics and Finance, La Trobe University)

Abstract

Economic events such as expansions and recessions in economic activity, bull and bear markets in stock prices and financial crises have long attracted substantial interest. In recent times there has been a focus upon predicting the events and constructing Early Warning Systems of them. Econometric analysis of such recurrent events is however in its infancy. One can represent the events as a set of binary indicators. However they are different to the binary random variables studied in micro-econometrics, being constructed from some (possibly) continuous data. The lecture discusses what difference this makes to their econometric analysis. It sets out a framework which deals with how the binary variables are constructed, what an appropriate estimation procedure would be, and the implications for the prediction of them. An example based on Turkish business cycles is used throughout the lecture.

Suggested Citation

  • Adrian Pagan & Don Harding, 2011. "Econometric Analysis and Prediction of Recurrent Events," CREATES Research Papers 2011-33, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:create:2011-33
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    References listed on IDEAS

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    More about this item

    Keywords

    Business and Financial Cycles; Binary Time Series; BBQ Algorithm;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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