Abstract:

The definition and differentiating characteristics of economic fluctuations vary depending on economies of the countries. The volatility of developing markets tends to be higher due to the large number of regime changes in economics and politics. The synchronization of the business cycles in economies has begun to be questioned within globalization. To examine the characteristics of expansion and recession periods in business cycles can create leading indicators for the economic structure. In addition, stabilization precautions can be taken to reduce the size of the economic fluctuations in the period of possible economic recession by business cycles. The effects of output are important in determining the monetary-fiscal and labor market policies in terms of sustainability of prosperity. Since the economic shrinkages caused by crises are tackled after they have occurred in developing countries such as Turkey, dealing with probable crises together with other business cycles can ensure better development of economic policies. By defining the business cycles and determining their characteristics, the causes of economic fluctuations can be understood and reduced. The studies on Turkey generally examine the regime changes in economic system. This paper contributes to the literature by investigating the structure that best describes the output with OECD-based recession definition. In the scope of article, the Markov-switching model is used to determine the behavior of the output in different regimes and to see the expansion and recession phases of the output. A single economic variable is preferred as a reference series and industrial production index is used between 1986:01-2017:05 monthly periods as a growth representative because the real gross domestic product variable is published on a quarterly basis.

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