expansions, normal recessions and severe recessions. We show that a two-state model is not sensitive enough to reliably detect … relatively mild recessions when the Great Recession of 2008/2009 is included in the sample. Adding a third state helps to clearly … distinguish normal and severe recessions, so that the model identifies reliably all business cycle turning points in our sample …

autoregression of real GDP. While this approach yields a cyclical component that is hardly revised with new incoming data due to the … potential GDP. A simple modification based on the mean of 4 to 12 quarter ahead forecast errors shares the favorable real …