Turns in Business Cycles
A turn in a business cycle is a change from a phase of expansion to one of recession (or vice versa). Both government and industry need to have systems for predicting the future state of the economy, for example in order to timely predict the shift from a period of expansion to one of recession. Warnings of a turn can be given by using information from one or several time series that are leading in relation to the actual business cycle. A system for detecting the turning points of a leading indicator can give us early indications on the future behavior of the business cycle.
As pointed out for example by Diebold and Rudebusch (1996), Kim and Nelson (1998) and Birchenhall et al. (1999), two distinct but related approaches to the characterisation and dating of the business cycle can be discerned. One approach emphasizes the common movements of several variables. This approach is pursued for example by Stock and Watson (1993). The other approach, the regime...
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References and Further Reading
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Frisén, M. (2011). Detection of Turning Points in Business Cycles. In: Lovric, M. (eds) International Encyclopedia of Statistical Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-04898-2_26
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