Identification of Business Cycles Using the leading Combination of the Iranian Economy

moving on production possibility frontier during the time is production trend and movement that are moved around the production possibilities frontier is concerned the business cycle. Economic variables can be divided in three categories in terms of the impact on the business cycle include Leading, coincident and lagging indicators. the group of economic series that is expected to shift before economic boom and bust changes are leading indicators. they are a sign for future trends of economy. the importance of leading indicators in comparison with other indices are that with the identification of Them can predict economy before entering periods of boom or recession. Since the use of leading single indicator for predicting the target variable according to the different characteristics and different sources recession (based on economic theories and experiences) is dangerous, the use of composite indicators is recommended. The combination of leading indicators into a composite index can be beneficial in receiving signals from different sectors. The leading composite index of leading indicators identified for the Iranian economy by combining 13 indicators of GDP, liquidity, stock index, oil revenues, investment in unfinished buildings were built. To evaluate the performance of composite leading indicator (CLI) and within-sample forecasting GDP growth during the period (2) 1376- (3) 1393 of the Markov switching model was used. Variables including GDP growth as the dependent variable, the first to fourth lag of CLI and GDP growth as independent variables, intercept and CLI as variables and regime change variables were considered. Among the policy recommendations of the study is attention of policy makers to warning indicators, especially in the economic downturn, lack of reliance on a single leading indicator of business cycles according to different sources and considering composite leading indicator for making the economic policies.