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Forecasting National Recessions Using State‐Level Data

Michael Owyang (), Jeremy Piger () and Howard Wall ()

Journal of Money, Credit and Banking, 2015, vol. 47, issue 5, 847-866

Abstract: We investigate whether there is information useful for identifying U.S. business cycle phases contained in subnational measures of economic activity. Using a probit model to forecast the National Bureau of Economic Research expansion and recession classification, we assess the incremental information content of state‐level employment growth over a commonly used set of national‐level predictors. As state‐level data adds a large number of predictors to the model, we employ a Bayesian model averaging procedure to construct forecasts. Based on a variety of forecast evaluation metrics, we find that including state‐level employment growth substantially improves nowcasts and very short‐horizon forecasts of the business cycle phase. The gains in forecast accuracy are concentrated during months of national recession.

Date: 2015
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http://hdl.handle.net/10.1111/jmcb.12228

Related works:
Working Paper: Forecasting national recessions using state level data (2012) Downloads
Working Paper: Forecasting national recessions using state-level data (2012) Downloads
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