Macroeconomic forecasting during the Great Recession: The return of non-linearity?

Massimiliano Marcellino, Laurent Ferrara and Matteo Mogliani

No 9313, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The debate on the forecasting ability of non-linear models has a long history, and the Great Recession episode provides us with an interesting opportunity for a reassessment of the forecasting performance of several classes of non-linear models. We conduct an extensive analysis over a large quarterly database consisting of major macroeconomic variables for a large panel of countries. It turns out that, on average, non-linear models cannot outperform standard linear specifications, even during the Great Recession. However, non-linear models lead to an improvement of the predictive accuracy in almost 40% of cases, and interesting specific patterns emerge among models, variables and countries. These results suggest that this specific episode seems to be characterized by a sequence of shocks with unusual large magnitude, rather than by an increase in the degree of non-linearity of the stochastic processes underlying the main macroeconomic time series.

Keywords: Great recession; Macroeconomic forecasting; Non-linear models (search for similar items in EconPapers)
JEL-codes: C22 C53 E37 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-for and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Macroeconomic forecasting during the Great Recession: The return of non-linearity? (2015)
Working Paper: Macroeconomic forecasting during the Great Recession: the return of non-linearity? (2015)
Working Paper: Macroeconomic forecasting during the Great Recession: The return of non-linearity? (2012)
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