Forecasting Recessions in Real Time

31 Pages Posted: 5 Jun 2014

Date Written: February 7, 2014


We review several methods to define and forecast classical business cycle turning points in Norway. In the paper we compare the Bry - Boschan rule (BB) with a Markov Switching model (MS), using alternative vintages of Norwegian Gross Domestic Product (GDP) as the business cycle indicator. The timing of business cycles depends on the vintage and the method used. BB provides the most reasonable definition of business cycles. The forecasting exercise, where the models are augmented with surveys or financial indicators, respectively, leads to the conclusion that the BB rule applied to density forecasts of GDP augmented with either the consumer confidence index or a financial conditions index provides the most timely predictions of peaks. For troughs, augmenting with surveys or financial indicators does not increase forecastability.

Keywords: Forecast densities; Turning Points; Real-time data

JEL Classification: C32, C52, C53, E37, E52

Suggested Citation

Aastveit, Knut and Jore, Anne Sofie and Ravazzolo, Francesco, Forecasting Recessions in Real Time (February 7, 2014). Norges Bank Working Paper 2014 | 02. Available at SSRN: or

Knut Aastveit

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107

Anne Sofie Jore (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107

Francesco Ravazzolo

Free University of Bolzano ( email )


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