Measuring the probability of a business cycle turning point by using a multivariate qualitative hidden Markov model
✍ Scribed by Stéphane Gregoir; Fabrice Lenglart
- Publisher
- John Wiley and Sons
- Year
- 2000
- Tongue
- English
- Weight
- 384 KB
- Volume
- 19
- Category
- Article
- ISSN
- 0277-6693
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✦ Synopsis
A two-step procedure to produce a statistical measure of the probability of being in an accelerating or decelerating phase of economic activity is proposed. It consists of, ®rst, an extraction of the individual linear innovations of a set of relevant macroeconomic variables whose signs are accumulated into a qualitative vector process and, second, of a factor analysis applied to this vector. The factor process is a two-state Markov process of order one whose states are described as favourable and unfavourable. Estimated on French business surveys, this measure appears to be a competitive coincident indicator.