 What predicts US recessions?Weiling Liu and Emanuel Moench International Journal of Forecasting, 2016, vol. 32, issue 4, 1138-1150 Abstract: We reassess the in- and out-of-sample predictability of US recessions at horizons of three months to two years ahead for a large number of previously proposed leading indicator variables, using the Treasury term spread as a benchmark. We estimate both univariate and multivariate probit models, and evaluate the relative model performance based on the receiver operating characteristic (ROC) curve. At the three- and six-month-ahead horizons, various alternative predictor variables increase the accuracy of recession forecasts significantly relative to the term spread, with the annual return on the S&P500 index providing the strongest improvement. While the Treasury term spread is more difficult to outperform systematically at longer horizons, manufacturers’ new orders of capital goods and balances in Broker-Dealer margin accounts increase the precision of recession predictions significantly at horizons of more than one year. Keywords: Recession predictability; ROC; Term spread; Leading indicators (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:32:y:2016:i:4:p:1138-1150 DOI: 10.1016/j.ijforecast.2016.02.007 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 |
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