Abstract
In thsi paper we analyze business cycles in Taiwan usign real GNP data. We first examine the effects of different time trend specifications on turning point identification. A two-state Markov switching model is then employed to characterize the annual growth rate of real GNP. The empirical results suggest that this model is suitable for identifying the troughs of Taiwan's business cycles. The Markov switching model also compares favorably with linear time series models in outof-sample predictions.