Forecasting Brazilian Output in the Presence of Breaks: A Comparison of Linear and Nonlinear Models

FRB of Atlanta Working Paper No. 2002-28

27 Pages Posted: 16 Apr 2003

See all articles by Marcelle Chauvet

Marcelle Chauvet

University of California Riverside

Elcyon C.R. Lima

Institute of Applied Economic Research (IPEA)

Brisne Vasquez

Institute of Applied Economic Research (IPEA)

Date Written: December 2002

Abstract

This paper compares the forecasting performance of linear and nonlinear models under the presence of structural breaks for the Brazilian real GDP growth. The Markov-switching models proposed by Hamilton (1989) and its generalized version proposed by Lam (1991) are applied to quarterly GDP from 1975:1 to 2000:2 allowing for breaks at the Collor Plans. The probabilities of recessions are used to analyze the Brazilian business cycle. The ability of each model in forecasting out-of-sample the growth rates of GDP is examined. The forecasting ability of the two models is also compared with linear specifications. The authors find that nonlinear models display the best forecasting performance and that specifications including the presence of structural breaks are important in obtaining a representation of the Brazilian business cycle.

Keywords: Forecast, business cycle, nonlinearities, structural breaks, Markov switching

JEL Classification: C32, E32

Suggested Citation

Chauvet, Marcelle and Rocha Lima, Elcyon Caiado and Vasquez, Brisne, Forecasting Brazilian Output in the Presence of Breaks: A Comparison of Linear and Nonlinear Models (December 2002). FRB of Atlanta Working Paper No. 2002-28. Available at SSRN: https://ssrn.com/abstract=367641 or http://dx.doi.org/10.2139/ssrn.367641

Marcelle Chauvet (Contact Author)

University of California Riverside ( email )

900 University Avenue
4136 Sproul Hall
Riverside, CA 92521
United States
(951) 827-1587 (Phone)

HOME PAGE: http://https://sites.google.com/site/marcellechauvet/

Elcyon Caiado Rocha Lima

Institute of Applied Economic Research (IPEA) ( email )

Av. Presidente Antonio Carlos 51
Directory of Macroeconomic Policy and Studies (DIMAC) 15 andar - Centro
RJ 20020-010 Rio de Janeiro
Brazil
+55 21 380-48062 (Phone)
+55 21 240-1920 (Fax)

Brisne Vasquez

Institute of Applied Economic Research (IPEA) ( email )

Av. Pres. Antonio Carlos , 51 - 17 andar
Rio de Janeiro, RJ, 20020-010
Brazil
55(21) 23804-8000 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
87
Abstract Views
949
rank
291,978
PlumX Metrics