Forecasting US recessions: The role of economic uncertainty

Valerio Ercolani and Filippo Natoli

Economics Letters, 2020, vol. 193, issue C

Abstract: This letter highlights the role of macroeconomic and financial uncertainty in predicting US recessions. In-sample forecasts using probit models indicate that the two variables are the best predictors of recessions at short horizons. Macroeconomic uncertainty has the highest predictive power up to 7 months ahead and becomes the second best predictor – after the yield curve slope – at longer horizons. Using data up to end-2018, out-of-sample forecasts show that uncertainty has significantly contributed to lower the probability of a recession in 2019, which indeed did not occur.

Keywords: Macroeconomic and financial uncertainty; Yield curve slope; Recession; Probit forecasting model (search for similar items in EconPapers)
JEL-codes: D81 E32 E37 E44 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176520302020
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Forecasting US recessions: the role of economic uncertainty (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520302020

DOI: 10.1016/j.econlet.2020.109302

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().