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Predicting turning points

Author

Listed:
  • Daniel M. Chin
  • John Geweke
  • Preston J. Miller

Abstract

This paper presents a new method for predicting turning points. The paper formally defines a turning point; develops a probit model for estimating the probability of a turning point; and then examines both the in-sample and out-of-sample forecasting performance of the model. The model performs better than some other methods for predicting turning points.

Suggested Citation

  • Daniel M. Chin & John Geweke & Preston J. Miller, 2000. "Predicting turning points," Staff Report 267, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:267
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    References listed on IDEAS

    as
    1. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 224-236, April.
    2. Miller, Preston J & Roberds, William T, 1991. "The Quantitative Significance of the Lucas Critique," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(4), pages 361-387, October.
    3. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
    4. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    5. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    6. J. Bradford De Long & Lawrence H. Summers, 1984. "Are Business Cycles Symmetric?," NBER Working Papers 1444, National Bureau of Economic Research, Inc.
    7. Pesaran, M. Hashem & Potter, Simon M., 1997. "A floor and ceiling model of US output," Journal of Economic Dynamics and Control, Elsevier, vol. 21(4-5), pages 661-695, May.
    8. Philip Rothman, 1998. "Forecasting Asymmetric Unemployment Rates," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 164-168, February.
    9. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409, National Bureau of Economic Research, Inc.
    10. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1, February.
    11. Stephen K. McNees, 1992. "How large are economic forecast errors?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 25-42.
    12. Neftci, Salih N, 1984. "Are Economic Time Series Asymmetric over the Business Cycle?," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 307-328, April.
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    Citations

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    Cited by:

    1. Harding, Don & Pagan, Adrian, 2011. "An Econometric Analysis of Some Models for Constructed Binary Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 86-95.
    2. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
    3. Don Harding & Adrian Pagan, 2006. "The Econometric Analysis of Constructed Binary Time Series," Department of Economics - Working Papers Series 963, The University of Melbourne.
    4. Khurshid Kiani, 2011. "Fluctuations in Economic and Activity and Stabilization Policies in the CIS," Computational Economics, Springer;Society for Computational Economics, vol. 37(2), pages 193-220, February.
    5. Andrea Carriero & Massimiliano Marcellino, 2007. "Monitoring the Economy of the Euro Area: A Comparison of Composite Coincident Indexes," Working Papers 319, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    6. Wildi, Marc, 2010. "Real-Time Signal Extraction: a Shift of Perspective/Extracción de señal en tiempo real: un cambio de perspectiva," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 28, pages 497-518, Diciembre.
    7. Adrian pagan & Don Harding, 2006. "The Econometric Analysis of Constructed Binary Time Series. Working paper #1," NCER Working Paper Series 1, National Centre for Econometric Research.
    8. Marco Del Negro, 2001. "Turn, turn, turn: Predicting turning points in economic activity," Economic Review, Federal Reserve Bank of Atlanta, vol. 86(Q2), pages 1-12.
    9. Peláez, Rolando F., 2015. "Market-timing the business cycle," Review of Financial Economics, Elsevier, vol. 26(C), pages 55-64.
    10. Christian Schulz, 2008. "Forecasting economic activity for Estonia : The application of dynamic principal component analyses," Bank of Estonia Working Papers 2008-02, Bank of Estonia, revised 30 Oct 2008.
    11. Di Guilmi, Corrado & Gaffeo, Edoardo & Gallegati, Mauro, 2004. "Empirical results on the size distribution of business cycle phases," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 333(C), pages 325-334.

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