IDEAS home Printed from https://ideas.repec.org/p/sza/wpaper/wpapers211.html
   My bibliography  Save this paper

A new recession-dating algorithm for South Africa

Author

Listed:
  • Pieter Laubscher

    (Bureau for Economic Research, University of Stellenbosch)

Abstract

The SA Reserve Bank (SARB) regularly determines the upper and lower turning points of the South African business cycle, but this is only completed after all the relevant information has been obtained, confirmed and analysed, causing a lengthy time lag between the actual determination and the event. The current research aimed to design a recession-dating algorithm, which could allow the Bureau for Economic Research (BER) to make accurate calls on business cycle turning points substantially sooner after the event than is the case with the official SARB determination, which typically lags actual turning points by 18 to 24 months. The proposed algorithm includes, as a point of departure, the advance signals given by the yield spread (between 3-month and 10-year government bonds), as well as a consideration of the local moments of five high-frequency economic time series. The turning point signals provided by these indicators (and after the application of censoring rules) are integrated by reconciling the differences through the use of the median date in order to derive true business cycle turning points. The algorithm was tested for the five recessions experienced over the 1981 to 2013 period. It was found that the algorithm could be applied successfully in calling the business cycle turning points over this 32-year period avoiding any false positives. A high degree of accuracy was also obtained, i.e. a median two month lag in respect of upper turning points (or peaks) of the SARB-determined business cycle and a one month lead in respect of lower turning points (i.e. troughs). The algorithm will not only allow the BER to make close calls on business cycle turning points, it will be able to do this with a much shorter time delay following actual turning points compared to the SARB’s official determination.

Suggested Citation

  • Pieter Laubscher, 2014. "A new recession-dating algorithm for South Africa," Working Papers 06/2014, Stellenbosch University, Department of Economics.
    • Handle: RePEc:sza:wpaper:wpapers211
    as

    Download full text from publisher

    File URL: https://www.ekon.sun.ac.za/wpapers/2014/wp062014/wp-06-2014.1.pdf
    File Function: First version, 2014
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stan du Plessis, 2006. "Business Cycles in Emerging market Economies: A New View of the Stylised Facts," Working Papers 02/2006, Stellenbosch University, Department of Economics.
    2. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1.
    3. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1.
    4. Wh Boshoff, 2005. "The Properties Of Cycles In South African Financial Variables And Their Relation To The Business Cycle," South African Journal of Economics, Economic Society of South Africa, vol. 73(4), pages 694-709, December.
    5. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew Phiri, 2018. "Nonlinear Relationship between Exchange Rate Volatility and Economic Growth," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 61(3), pages 15-38.
    2. Fourie, Justin & Pretorius, Theuns & Harvey, Rhett & Henrico, Van Niekerk & Phiri, Andrew, 2016. "Nonlinear relationship between exchange rate volatility and economic growth: A South African perspective," MPRA Paper 74671, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rachel Male, 2010. "Developing Country Business Cycles: Characterising the Cycle," Working Papers 663, Queen Mary University of London, School of Economics and Finance.
    2. Rachel Male, 2011. "Developing Country Business Cycles: Characterizing the Cycle," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 20-39, May.
    3. Borio, Claudio, 2014. "The financial cycle and macroeconomics: What have we learnt?," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 182-198.
    4. Esteban Pérez Caldentey & Daniel Titelman & Pablo Carvallo, 2014. "Weak Expansions: A Distinctive Feature of the Business Cycle in Latin America and the Caribbean," World Economic Review, World Economics Association, vol. 2014(3), pages 1-69, February.
    5. Mathias Drehmann & Claudio Borio & Kostas Tsatsaronis, 2012. "Characterising the financial cycle: don't lose sight of the medium term!," BIS Working Papers 380, Bank for International Settlements.
    6. Enrique A. López-Enciso, 2017. "Dos tradiciones en la medición del ciclo: historia general y desarrollos en Colombia," Borradores de Economia 986, Banco de la Republica de Colombia.
    7. Adél Bosch & Steven F. Koch, 2020. "The South African Financial Cycle and its Relation to Household Deleveraging," South African Journal of Economics, Economic Society of South Africa, vol. 88(2), pages 145-173, June.
    8. Enrique López Enciso, 2019. "Dos tradiciones en la medición del ciclo: historia general y desarrollos en Colombia," Tiempo y Economía, Universidad de Bogotá Jorge Tadeo Lozano, vol. 6(1), pages 77-142, February.
    9. Greg Farrell & Esti Kemp, 2020. "Measuring the Financial Cycle in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 88(2), pages 123-144, June.
    10. Lippi, Marco & Reichlin, Lucrezia & Hallin, Marc & Forni, Mario & Altissimo, Filippo & Cristadoro, Riccardo & Veronese, Giovanni & Bassanetti, Antonio, 2001. "EuroCOIN: A Real Time Coincident Indicator of the Euro Area Business Cycle," CEPR Discussion Papers 3108, C.E.P.R. Discussion Papers.
    11. Claudio Borio, 2013. "On Time, Stocks and Flows: Understanding the Global Macroeconomic Challenges," National Institute Economic Review, National Institute of Economic and Social Research, vol. 225(1), pages 3-13, August.
    12. Aastveit, Knut Are & Jore, Anne Sofie & Ravazzolo, Francesco, 2016. "Identification and real-time forecasting of Norwegian business cycles," International Journal of Forecasting, Elsevier, vol. 32(2), pages 283-292.
    13. Viviana Alejandra Alfonso & Luis Eduardo Arango Thomas & Fernando Arias & José David Pulido, 2011. "Ciclos de negocios en Colombia: 1980-2010," Borradores de Economia 8328, Banco de la Republica.
    14. Grigoraş, Veaceslav & Stanciu, Irina Eusignia, 2016. "New evidence on the (de)synchronisation of business cycles: Reshaping the European business cycle," International Economics, Elsevier, vol. 147(C), pages 27-52.
    15. Hall, Viv B & Thomson, Peter, 2022. "A boosted HP filter for business cycle analysis: evidence from New Zealand’s small open economy," Working Paper Series 9473, Victoria University of Wellington, School of Economics and Finance.
    16. Penelope A. Smith & Peter M. Summers, 2005. "How well do Markov switching models describe actual business cycles? The case of synchronization," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 253-274.
    17. Esser, Andreas, 2014. "A Wavelet Approach to Synchronization of Output Cycles," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100545, Verein für Socialpolitik / German Economic Association.
    18. Marcus Scheiblecker, 2007. "Datierung von Konjunkturwendepunkten in Österreich," WIFO Monatsberichte (monthly reports), WIFO, vol. 80(9), pages 715-730, September.
    19. Engemann, Kristie M. & Kliesen, Kevin L. & Owyang, Michael T., 2011. "Do Oil Shocks Drive Business Cycles? Some U.S. And International Evidence," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 498-517, November.
    20. Wong, Shirly Siew-Ling & Puah, Chin-Hong & Abu Mansor, Shazali & Liew, Venus Khim-Sen, 2012. "Early warning indicator of economic vulnerability," MPRA Paper 39944, University Library of Munich, Germany.

    More about this item

    Keywords

    Business cycles; turning points; quantitative analysis of business cycles;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sza:wpaper:wpapers211. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Melt van Schoor (email available below). General contact details of provider: https://edirc.repec.org/data/desunza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.