PREDICTING THE PROBABILITY OF A RECESSION WITH NONLINEAR AUTOREGRESSIVE LEADING-INDICATOR MODELS

Heather M. Anderson and Farshid Vahid ()

Macroeconomic Dynamics, 2001, vol. 5, issue 04, pages 482-505

Abstract: We develop nonlinear leading-indicator models for GDP growth, with the interest-rate spread and growth in M2 as leading indicators. Since policy makers typically are interested in whether a recession is imminent, we evaluate these models according to their ability to predict the probability of a recession. Using data for the United States, we find that conditional on the spread, the marginal contribution of M2 growth in predicting recessions is negligible.

Date: 2001
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Working Paper: Predicting the Probability of a Recession with Nonlinear Autoregressive Leading Indicator Models (2000)
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Persistent link: http://EconPapers.repec.org/RePEc:cup:macdyn:v:5:y:2001:i:04:p:482-505_02

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