| Summary: | 碩士 === 國立中山大學 === 財務管理學系研究所 === 103 === A recession will lead to an increase of systematic risks of financial institutions. Besides, crude oil price fluctuations have significant influence on the business cycle in Taiwan. Therefore, this paper constructs a business composite indicator consisting of crude oil price variable.
In order to enhance the reliability of this research, this paper uses Markov regime switching model to objectively determine the points of time which is regarded as a trough in Taiwan business cycle. Also, this paper uses signal approach to select the variables which can detect signs of a recession. Then, all selected variables are restructured and composed as a Taiwan business comprehensive indicator, including crude oil price variable. This paper hopes the indicator accurately predicts future economic cycles.
Finally, the evidence shows that the signal of crude oil price variable has better prediction ability than other macroeconomic variables in the research. In addition, the business cycle indicator can effectively signal ahead of the recessions or various major historical crises. To sum up, the model of this research can be used feasibly in practice.
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