The Probability of Recession in Poland Based on the Hamilton Switching Model and the Logit Model

Abstract

In the article dating method for the four phases of economic activity is presented. Comparison of probabilities of recession occurrence in Poland based on the Hamilton switching model and the logit model was conducted in the empirical research. The study shows the convergence of indications based both on the proposed dating method and on the Hamilton model. In the presented version the Hamilton model adequately describes the probability of occurrence of two decline phases. The logit model allows to obtain satisfactory results for the division on four phases of economic activity. However, in the domain of the Polish economy, more research is needed in recognising the symptomatic properties of various macroeconomic indicators. The interest rate spread, used successfully in advanced marked economies, continues to alter its characteristics under Polish economic conditions and is currently not the best possible indicator forecasting a recession. K e y w o r d s: switching model, logit model, dating of economic activity phases, probability of recession. J E L Classification: E32, E37.