Financial and Real Sector Leading Indicators of Recessions in Brazil using Probabilistic Models

Fernando Oliveira

No 402, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: We examine the usefulness of various financial and real sector variables to forecast recessions in Brazil between one and eight quarters ahead. We estimate probabilistic models of recession and select models based on their out-of-sample forecasts, using the Receiver Operating Characteristic (ROC) function. We find that the predictive out-of-sample ability of several models vary depending on the numbers of quarters ahead to forecast and on the number of regressors used in the model specification. The models selected seem to be relevant to give early warnings of recessions in Brazil.

Date: 2015-09
New Economics Papers: this item is included in nep-for and nep-mac
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