<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This paper aims at assessing the usefulness of leading indicators in business cycle research and forecast. Initially we test the predictive power of the economic sentiment indicator (ESI) within a static probit model as a leading indicator, commonly perceived to be able to provide a reliable summary of the current economic conditions. We further proceed analyzing how well an extended set of indicators performs in forecasting turning points of the Macedonian business cycle by employing the Qual VAR approach of <xref ref-type="bibr" rid="j_jcbtp-2016-0020_ref_005_w2aab2b8b3b1b7b1ab1ab5Aa">Dueker (2005)</xref>. In continuation, we evaluate the quality of the selected indicators in pseudo-out-of-sample context. The results show that the use of survey-based indicators as a complement to macroeconomic data work satisfactory well in capturing the business cycle developments in Macedonia.</p></abstract>

This paper aims at assessing the usefulness of leading indicators in business cycle research and forecast. Initially we test the predictive power of the economic sentiment indicator (ESI) within a static probit model as a leading indicator, commonly perceived to be able to provide a reliable summary of the current economic conditions. We further proceed analyzing how well an extended set of indicators performs in forecasting turning points of the Macedonian business cycle by employing the Qual VAR approach of Dueker (2005). In continuation, we evaluate the quality of the selected indicators in pseudo-out-of-sample context. The results show that the use of survey-based indicators as a complement to macroeconomic data work satisfactory well in capturing the business cycle developments in Macedonia.

Forecasting Macedonian Business Cycle Turning Points Using Qual Var Model

National Bank of the Republic of Macedonia

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Forecasting Macedonian Business Cycle Turning Points Using Qual Var Model"}

This paper aims at assessing the usefulness of leading indicators in business cycle research and forecast. Initially we test the predictive power of the...

Forecasting Macedonian Business Cycle Turning Points Using Qual Var Model

Published Online: Sep 23, 2016

Page range: 61 - 78

Received: Apr 06, 2016

Accepted: Jul 25, 2016

DOI: https://doi.org/10.1515/jcbtp-2016-0020

Keywords
Forecasting, Business cycle turning points, Qual VAR, MCMC, Latent variable

© 2016 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Forecasting Macedonian Business Cycle Turning Points Using Qual Var Model

Published Online: Sep 23, 2016

Page range: 61 - 78

Received: Apr 06, 2016

Accepted: Jul 25, 2016

DOI: https://doi.org/10.1515/jcbtp-2016-0020

KeywordsForecasting, Business cycle turning points, Qual VAR, MCMC, Latent variable

© 2016 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
Forecasting, Business cycle turning points, Qual VAR, MCMC, Latent variable