Comparison of regime switching, probit and logit models in dating and forecasting US business cycles

Article

Layton, Allan P. and Katsuura, Masaki. 2001. "Comparison of regime switching, probit and logit models in dating and forecasting US business cycles." International Journal of Forecasting. 17 (3), pp. 403-417. https://doi.org/10.1016/S0169-2070(01)00096-6
Article Title

Comparison of regime switching, probit and logit models in dating and forecasting US business cycles

ERA Journal ID18163
Article CategoryArticle
AuthorsLayton, Allan P. (Author) and Katsuura, Masaki (Author)
Journal TitleInternational Journal of Forecasting
Journal Citation17 (3), pp. 403-417
Number of Pages15
Year2001
PublisherElsevier
Place of PublicationAmsterdam, Netherlands
ISSN0169-2070
1872-8200
Digital Object Identifier (DOI)https://doi.org/10.1016/S0169-2070(01)00096-6
Web Address (URL)https://www.sciencedirect.com/science/article/pii/S0169207001000966
Abstract

Three non-linear model specifications are tested for their efficacy in dating and forecasting US business cycles, viz. a probit specification, a logit specification - both binomial and multinomial alternatives - and a markov, regime-switching specification. The models employ leading indicators compiled by the Economic Cycle Research Institute as putative explanators. They are tested within sample to determine their relative abilities to produce a business cycle chronology similar to the official NBER chronology. They are also tested in a post-sample context to test their relative abilities in anticipating
future turning points with the result that the regime-switching model with time-varying transition probabilities performs the best.

Keywordsbusiness cycles; regime switching model; logit and probit model; quadratic probability score
ANZSRC Field of Research 2020380203. Economic models and forecasting
380304. Microeconomic theory
380205. Time-series analysis
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Byline AffiliationsQueensland University of Technology
Meijo University, Japan
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