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Forecasting and Recognizing Business Cycle Turning Points

  • Economics


PART 1 RENDIGS FELS Introduction This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Forecasting and Recognizing Business Cycle Turning Points Volume Author/Editor: Fels, Rendigs and C. Elton Hinshaw Volume Publisher: UMI Volume ISBN: 0-870-14479-0 Volume URL: Publication Date: 1968 Chapter Title: PART 1 RENDIGS FELS Introduction Chapter Author: Rendigs Fels, C. Elton Hinshaw Chapter URL: Chapter pages in book: (p. 1 - 4) 1 Introduction This paper reports on an investigation into the problem of forecasting and recognizing business cycle peaks and troughs. The word "recogniz- ing" is used here to denote the pattern beginning with the vague early warnings forecasters usually give that the cyclical situation may be changing through the successive stages of increasing awareness until they finally confirm that a turn has definitely occurred.' In a sense, the entire process of recognition is one aspect of short-term business fore- casting, though it is more usual to restrict the meaning of the phrase "forecasting cyclical turns" to the part of the recognition pattern that precedes the date of the peak or trough. The sooner a forecaster can give warning of a turnabout, even if the warning comes after the event, the more useful his forecasts will be. When he first gives warning, he may think a turning point is not probable. As time goes by, evidence for or against the hypothesis of a reversal builds up. In the case of a genuine turn, the forecaster eventually becomes certain. Confirmation that a turn has occurred can be useful for forecasting—is itself a forecast—if it can be achieved within six months (or sometimes even longer) after the peak or trough of the business cycle.2 1 Terms like "recognition" and "recognition lag" are used in different senses in the literature. Kareken and Solow in a study of the Federal Reserve System def

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