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Business cycle dating and forecasting with real-time Swiss GDP data

  • Christian GlockerEmail author
  • Philipp Wegmueller
Article

Abstract

We develop a small-scale dynamic factor model for the Swiss economy allowing for nonlinearities by means of a two-state Markov chain. The selection of an appropriate set of indicators utilizes a combinatorial algorithm. The model’s forecasting performance is as good as that of peers with richer dynamics. It proves particularly useful for a timely assessment of the business cycle stance, as the recessionary regime probabilities tend to have a leading property. The model successfully anticipated the downturn of the 2008–2009 recession and promptly indicated a fall in GDP growth following the discontinuation of the exchange rate floor of the Swiss Franc.

Keywords

Dynamic factor model Nowcasting Real-time data Markov-switching Business cycle dating 

JEL classification

C32 C53 E37 

Notes

Compliance with ethical standards

Conflict of Interest

The authors declare that they have no conflict of interest.

Human participants or animals

This article does not contain any studies with human participants or animals performed by any of the authors.

Supplementary material

181_2019_1666_MOESM1_ESM.pdf (359 kb)
Supplementary material 1 (pdf 359 KB)

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Austrian Institute of Economic ResearchViennaAustria
  2. 2.State Secretariat for Economic Affairs (SECO)BerneSwitzerland

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