Real-time Markov Switching and Leading Indicators in Times of the Financial Crisis

@inproceedings{Theobald2012RealtimeMS,
  title={Real-time Markov Switching and Leading Indicators in Times of the Financial Crisis},
  author={Thorsten Theobald},
  year={2012}
}
This paper uses several macroeconomic and financial indicators within a Markov Switching (MS) framework to predict the turning points of the business cycle. The presented model is applied to monthly German real-time data covering the recession and the recovery after the financial crisis. We show how to take advantage of combining single MS forecasts and of changing the number of regimes on the real-time path, where both leads to a higher forecast accuracy. Changing the number of regimes implies… CONTINUE READING

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