Forecasting recessions: the importance of the financial cycle
Claudio Borio (),
Mathias Drehmann and
Fan Dora Xia
Journal of Macroeconomics, 2020, vol. 66, issue C
Financial cycles can be important drivers of real activity, but there is scant evidence about how well they signal recession risks. We address this question, using a range of financial cycle measures. Unlike most papers, ours assesses forecasting performance not just for the United States but also for a panel of advanced and emerging market economies. We find that financial cycle measures have significant forecasting power both in and out of sample, even for a three-year horizon. Moreover, they outperform the term spread - the most widely used indicator in the literature - in nearly all specifications. These results are robust to different recession specifications.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:66:y:2020:i:c:s016407042030183x
Access Statistics for this article
Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos
More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().