The European way out of recession
O. Bouabdallah and
Laurent Ferrara ()
Working papers from Banque de France
This paper proposes a two-regime Bounce-Back Function augmented Self-Exciting Threshold AutoRegression (SETAR) which allows for various shapes of recoveries from the recession regime. It relies on the bounce-back effects first analyzed in a Markov-Switching setup by Kim, Morley and Piger  and recently extended by Bec, Bouabdallah and Ferrara [2011a]. This approach is then applied to post-1973 quarterly growth rates of French, German, Italian, Spanish and Euro area real GDPs. Both the linear autoregression and the standard SETAR without bounce-back effect null hypotheses are strongly rejected against the Bounce-Back augmented SETAR alternative in all cases but Italy. The relevance of our proposed model is further assessed by the comparison of its short-term forecasting performances with the ones obtained from a linear autoregression and a standard SETAR. It turns out that the bounce-back models one-step ahead forecasts generally outperform the other ones, and particularly so during the last recovery period in 2009Q3-2010Q4.
Keywords: Threshold autoregression; bounce-back effects; asymmetric business cycles. (search for similar items in EconPapers)
JEL-codes: E32 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-for and nep-mac
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Working Paper: The European Way Out of Recessions (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:360
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