Forecasting Taiwan's Recessions with Dynamic Probit Model

• Main Authors: Huang, Jianming, 黃建銘
• Other Authors: Lee, Weiming
• Format: Others
• Language: en_US
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/03258939067815821063

碩士 === 國立中正大學 === 國際經濟研究所 === 100 === Many researches of Taiwan's business cycles primarily focus on identifying the turning points of business cycles with Markov-switching models. The purpose of this thesis is to investigate the predictability of Taiwan's recession. We adopt the dynamic Probit model and use the term spread as a predictive indicator to forecast Taiwan's recessions because many papers have found the superior predictive power of the term spread. On the other hand, we also consider the energy price as a predictor. Our findings suggest that compared to static models, dynamic models provide more reliable predictions in in-sample and out-sample results. However. dynamic models become inaccurate gradually with the increase of the forecast horizon in out-of-sample results. From the performances of predictive variables, the volatility of energy prices is a better predictor.