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POSTPONED - Score-driven Time-varying Transition Probabilities in Dynamic Factor Markov-Switching Model

Wednesday 11 March 2020, 1.00PM to 2.00 pm

Speaker(s): Dick van Dijk (Erasmus)

Postponed: new date to be decided.

Host: Peter Smith

Abstract The dynamic factor Markov-switching (DFMS) model introduced by Chauvet (1998) has proven to be a powerful framework to measure the business cycle. We extend the DFMS framework by allowing for timevarying transition probabilities, with the aim of accelerating the real-time dating of turning points between expansion and recession regimes. Time-variation of the transition probabilities is brought about endogenously using the accelerated score-driven framework and exogenously using the term spread. In a real-time application, using the four components of The Conference Board’s Coincident Economic Index for the period 1959-2019, significantly improved recession dating is obtained.

Location: A/RC014 Alan Maynard Auditorium

Admission: All welcome