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.
More articles in Macroeconomic Dynamics from Cambridge University Press Address: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK Series data maintained by Mike Eden ().
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