This paper uses both univariate and multivariate Markov-switching models to explore the characteristics of the regional business cycle phases in Taiwan. In particular, this paper provides novel evidence regarding the “turning-point identification” puzzle in Taiwan that to date has not been fully resolved. We find that the regime-switching behaviour of the common regional business cycle is consistent (or even precedes recession) with the business cycle expansion and contraction indicators used by the Council for Economic Planning and Development. This finding suggests that the common regional business cycle identifies the turning point after the 1990s. This finding also suggests that the employment growth index would be a great indicator for monitoring the business cycle in Taiwan.
South African Journal of Economics 79(4), pp.452–469