Predicting UK business cycle regimes

Citation
Cr. Birchenhall et al., Predicting UK business cycle regimes, SCOT J POLI, 48(2), 2001, pp. 179-195
Citations number
31
Categorie Soggetti
Economics
Journal title
SCOTTISH JOURNAL OF POLITICAL ECONOMY
ISSN journal
00369292 → ACNP
Volume
48
Issue
2
Year of publication
2001
Pages
179 - 195
Database
ISI
SICI code
0036-9292(200105)48:2<179:PUBCR>2.0.ZU;2-Z
Abstract
This paper uses logistic regression to construct a one-quarter ahead predic tion model for classical business cycle regimes in the UK. The binary depen dent variable is obtained by applying simple mechanical rules to date turni ng points in quarterly real GDP data from 1963 to 1999. Using a range of re al and financial leading indicators, several parsimonious one-quarter-ahead models are developed for the GDP regimes, with model selection based on th e SIC criterion. A veal M4 variable is consistently found to have predictiv e content. One model that performs well combines this with nominal UK and G erman short-term interest rates. The role of the latter emphasises the open nature of the UK economy.