Comparison of regime switching, probit and logit models in dating and forecasting US business cycles

Three non-linear model specifications are tested for their efficacy in dati ng and forecasting US business cycles, viz. a probit specification, a logit specification - both binomial and multinomial alternatives - and a markov, regime-switching specification. The models employ leading indicators compi led by the Economic Cycle Research Institute as putative explanators. They are tested within sample to determine their relative abilities to produce a business cycle chronology similar to the official NBER chronology. They ar e also tested in a post-sample context to test their relative abilities in anticipating future turning points with the result that the regime-switchin g model with time-varying transition probabilities performs the best. (C) 2 001 International Institute of Forecasters. Published by Elsevier Science B .V.