Predicting U.S. recessions: financial variables as leading indicators

Arturo Estrella and Frederic Mishkin

No 9609, Research Paper from Federal Reserve Bank of New York

Abstract: This article examines the performance of various financial variables as predictors of U.S. recessions. Series such as interest rates and spreads, stock prices, currencies, and monetary aggregates are evaluated individually and in comparison with other financial and non-financial indicators. The analysis focuses on out-of-sample performance from 1 to 8 quarters ahead. Results show that stock prices are useful with 1-3 quarter horizons, as are some well-known macroeconomic indicators. Beyond 1 quarter, however, the slope of the yield curve emerges as the clear individual choice and typically performs better by itself out of sample than in conjunction with other variables.

Keywords: Economic indicators; Recessions (search for similar items in EconPapers)
Date: 1996
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Related works:
Journal Article: Predicting U.S. Recessions: Financial Variables As Leading Indicators (1998)
Working Paper: Predicting U.S. Recessions: Financial Variables as Leading Indicators (1995)
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