Predicting Canadian Recessions Using Financial Variables: A Probit Approach

Joseph Atta-Mensah () and Greg Tkacz ()

Working Papers from Bank of Canada

Abstract: This paper examines the ability of a number of financial variables to predict Canadian recessions. Regarding methodology, we follow closely the technique employed by Estrella and Mishkin (1998), who use a probit model to predict U.S. recessions up to eight quarters in advance. Our main finding is that the spread between the yield on Canadian long bonds and the 90-day commercial paper rate is particularly useful in predicting Canadian recessions. This result is consistent with those of Estrella and Mishkin (1998).

Keywords: Business fluctuations and cycles; Interest rates (search for similar items in EconPapers)
JEL-codes: E32 E43 (search for similar items in EconPapers)
Date: 1998
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