Confidence Indexes and the Probability of Recession: A Markov Switching Model

Indian Economic Review, Vol. 36, No. 1

Cass Business School Research Paper

Posted: 6 Nov 2002

See all articles by Roy Batchelor

Roy Batchelor

City University Business School

Abstract

This paper uses a time-varying parameter Markov switching model to measure linkages between business confidence, consumer confidence, and the state of the economy in the US and the UK. Falling business confidence significantly increases the probability that growth will subsequently fall. Rising consumer confidence significantly increases the probability of recovery. But these relationships do not yield a reliable method for anticipating business cycle turning points.

Keywords: Markov Switching, Consumer confidence, bubsiness confidence, turning point prediction

JEL Classification: E32, E37

Suggested Citation

Batchelor, Roy, Confidence Indexes and the Probability of Recession: A Markov Switching Model. Indian Economic Review, Vol. 36, No. 1, Cass Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=329483

Roy Batchelor (Contact Author)

City University Business School ( email )

London, EC2Y 8HB
Great Britain
+44 0 207 040 8733 (Phone)
+44 0 207 040 8881 (Fax)

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