OECD Journal: Journal of Business Cycle Measurement and Analysis
- Discontinued
The Journal of Business Cycle Measurement and Analysis has been discontinued as of 24 June 2016. This journal was published jointly with CIRET from 2004 to 2015. For more information see www.ciret.org/jbcy.
- Semiannual
- ISSN: 19952899 (online)
- https://doi.org/10.1787/19952899
Markov-Switching and the Ifo Business Climate
the Ifo Business Cycle Traffic Lights
Business cycle indicators are used to assess the economic situation of countries or regions. They are closely watched by the public, but are not easy to interpret. Does a current movement of the indicator signal a turning point or not? With the help of Markov Switching Models movements of indicators can be transformed in probability statements. In this article, the most important leading indicator of the German business cycle, the Ifo Business Climate, is described by a Markov Switching Model. Real-time probabilities for the current business-cycle regime are derived and presented in an innovative way: as the Ifo traffi c lights. JEL Classifi cation: E32, C22 Keywords: Ifo business climate, growth cycle, turning points, Markov-switching
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