Abstract #300314

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JSM 2002 Abstract #300314
Activity Number: 8
Type: Invited
Date/Time: Sunday, August 11, 2002 : 2:00 PM to 3:50 PM
Sponsor: Business & Economics Statistics Section*
Abstract - #300314
Title: The Use of Leading Economic Indicators for Forecasting Business Cycle Turning Points
Author(s): Max Chen*+
Affiliation(s): Conference Board
Address: 845 Third Avenue, New York City, New York, 10022,
Keywords:
Abstract:

In this paper we investigate the predictive power of using economic leading indicators for forecasting business cycle turning points. Individual and composite leading indicators are used. Main forecasting models are utilized, including AR, VAR, BAR, BVAR, dynamic factor, Markov Switching, dynamic factor with Markov Switching. In order to generate probability forecasts, different turning point definitions are examined. Given the model estimation and definition of turning point, we generate predictive distributions of future observations and probability forecasts of future turning points via Monte Carlo simulation. Bayesian concept of loss function is introduced to emphasize the asymmetric situations the decision-makers face.

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Revised March 2002