Univariate Modeling of Indonesian Economic Growth Movement Using Markov Switching in Mean – Autoregressive

M. Fajar¹ , Y.G. Winarti²

Section:Research Paper, Product Type: Journal-Paper
Vol.8 , Issue.1 , pp.32-38, Feb-2021

Online published on Feb 28, 2021

Copyright © M. Fajar, Y.G. Winarti . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
The purpose of this research is to construct a model of the Indonesia economic growth movement. Data used is economic growth rate (year on year, in percent) from the 1983 1st quarter – 2020 3rd quarter. Data sourced is Statistics Indonesia. The model used to construct the economic growth movement is Markov Switching in Mean - Autoregressive (MSM-AR) Model. The results of this research are that MSM-AR(3) was able to fit the recession signal according to the period of the economic crisis in 1998 and the period of the COVID-19 pandemic. By using the MSM-AR(3) model, it can be predicted that in the 4th quarter of 2020, the economic condition is still in the recession regime because of the COVID-19 pandemic. In 2021, MSM-AR(3) predicts that there is an economic recovery. It is indicated by positive economic growth forecasting and increasing every quarter, and the probability of a recession regime reach more than 0.5 per quarter.

Key-Words / Index Term :
Markov, switching, growth, transition, autoregressive

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