Norges Bank

Working Paper

Combination schemes for turning point predictions

Author:
Monica Billio, Roberto Casarin, Francesco Ravazzolo and Herman K. van Dijk
Series:
Working Paper
Number:
4/2012

Abstract:

We propose new forecast combination schemes for predicting turning points of business cycles. The combination schemes deal with the forecasting performance of a given set of models and possibly providing better turning point predictions. We consider turning point predictions generated by autoregressive (AR) and Markov-Switching AR models, which are commonly used for business cycle analysis. In order to account for parameter uncertainty we consider a Bayesian approach to both estimation and prediction and compare, in terms of statistical accuracy, the individual models and the combined turning point predictions for the United States and Euro area business cycles.

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ISSN 1502-8190 (online)

Published 10 April 2012 14:22
Published 10 April 2012 14:22