Predicting the Probability of a Recession with Nonlinear Autoregressive Leading Indicator Models

Heather Anderson and Farshid Vahid

No 3/00, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: We develop nonlinear leading indicator models for GDP growth, with the interest rate spread and growth in M2 as leading indicators. Since policy makers are typically interested in whether or not a recession is imminent, we evaluate these models according to their ability to predict the probability of a recession. Using data for the United States, we find that conditional on the spread, the marginal contribution of M2 growth in predicting recessions is negligible.

Keywords: Event probabilities; Leading Indicators; Nonlinear Models (search for similar items in EconPapers)
JEL-codes: C22 C23 E17 E37 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2000-03
New Economics Papers: this item is included in nep-ets
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: PREDICTING THE PROBABILITY OF A RECESSION WITH NONLINEAR AUTOREGRESSIVE LEADING-INDICATOR MODELS (2001)
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