Identification and Real-Time Forecasting of Norwegian Business Cycles

37 Pages Posted: 10 Jun 2015

See all articles by Knut Aastveit

Knut Aastveit

Norges Bank

Anne Sofie Jore

Norges Bank

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management; BI Norwegian Business School

Date Written: May 8, 2015

Abstract

We define and forecast classical business cycle turning points for the Norwegian economy. When defining reference business cycles, we compare a univariate and a multivariate Bry-Boschan approach with univariate Markov-switching models and Markov-switching factor models. On the basis of a receiver operating characteristic curve methodology and a comparison of business cycle turning points with Norway’s main trading partners, we find that a Markov-switching factor model provides the most reasonable definition of Norwegian business cycles for the sample 1978Q1-2011Q4. In a real-time out-of-sample forecasting exercise, focusing on the last recession, we show that univariate Markov-switching models applied to surveys and a financial conditions index are timely and accurate in calling the last peak in real time. The models are less accurate and timely in calling the trough in real time.

Keywords: Business cycle; Dating rules; Turning Points; Real-time data

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

Suggested Citation

Aastveit, Knut and Jore, Anne Sofie and Ravazzolo, Francesco, Identification and Real-Time Forecasting of Norwegian Business Cycles (May 8, 2015). Norges Bank Working Paper 09 | 2015. Available at SSRN: https://ssrn.com/abstract=2616800 or http://dx.doi.org/10.2139/ssrn.2616800

Knut Aastveit (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Anne Sofie Jore

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.francescoravazzolo.com/

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