EconPapers    
Economics at your fingertips  
 

Predicting recessions with a composite real-time dynamic probit model

Christian R. Proaño and Thomas Theobald ()

International Journal of Forecasting, 2014, vol. 30, issue 4, 898-917

Abstract: In this paper we propose a composite indicator for real-time recession forecasting based on alternative dynamic probit models. For this purpose, we use a large set of monthly macroeconomic and financial leading indicators from the German and US economies. Alternative dynamic probit regressions are specified through automated general-to-specific and specific-to-general lag selection procedures on the basis of slightly different initial sets. The resulting recession probability forecasts are then combined in order to decrease the volatility of the forecast errors and increase their forecasting accuracy. This procedure features not only good in-sample forecast statistics, but also good out-of-sample performances, as is illustrated using a real-time evaluation exercise.

Keywords: Dynamic binary choice models; Out-of-sample forecasting; Yield curve; Real-time econometrics (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0169207014000508
Full text for ScienceDirect subscribers only

Related works:
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:intfor:v:30:y:2014:i:4:p:898-917

Access Statistics for this article

International Journal of Forecasting is currently edited by R. J. Hyndman

More articles in International Journal of Forecasting from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-09-18
Handle: RePEc:eee:intfor:v:30:y:2014:i:4:p:898-917