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OECD Journal: Journal of Business Cycle Measurement and Analysis

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.

English

Keywords: business tendency, economic measurement, economic statistics, cyclical indicators, business surveys, business cycles, economic research, business investment, consumer surveys, economic indicators, economic cycle, cyclical fluctuations, short-term, economic analysis

Constructing a Markov-switching turning point index using mixed frequencies with an application to French business survey data

This paper proposes an indicator for detecting business cycles turning points incorporating mixed frequency business survey data. It is based on a hidden Markow-Switching model and allows for the detection of regime changes in a given economy where information is displayed monthly, bimonthly and quarterly. Adapting existing indicators such as Hamilton (1989) and Gregoir and Lenglart (2000) to this frequency mix constitutes the main contribution of the present work. The proposed methodology is applied to the French economy. Using balances from different business surveys, this indicator measures the probability of being in an accelerating or a decelerating phase. The indicator is compared over the past with a reference dating established upon the business cycle component of GDP e xtracted by a Christiano-Fitzerald filter. It exhibits quite clearly and timely regimes changes of the French outlook. In this case the mixed frequency methodology adapted from Gregoir and Lengart yields better performance than the Hamilton-based indicator. Considering the adequacy with the reference dating over the past, the French turning point index (TPI) provdies an accurate signal on the current outlook.

English

Keywords: Business Cycle, Regime Change Detection, Turning Points, Hidden Markov Model
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