Dating U.S. Business Cycles with Macro Factors

Sebastian Fossati

No 2011-5, Working Papers from University of Alberta, Department of Economics

Abstract: A probit model is used to show that latent common factors estimated by principal components from a large number of macroeconomic time series have important predictive power for NBER recession dates. A pseudo out-of-sample forecasting exercise shows that predicted recession probabilities consistently rise during subsequently declared NBER recession dates. The latent variable in the factor-augmented probit model is interpreted as an index of real business conditions which can be used to assess the strength of an expansion or the depth of a recession.

Keywords: business cycle; forecasting; factors; probit model; Bayesian methods (search for similar items in EconPapers)
JEL-codes: C01 C22 C25 E32 E37 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-05-01, Revised 2012-02-01
New Economics Papers: this item is included in nep-bec, nep-cba, nep-ecm, nep-for and nep-ore
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Citations: View citations in EconPapers (1)

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Journal Article: Dating US business cycles with macro factors (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2011_005

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