Economic activity and Recession Probabilities: spread predictive power in Italy

Costanza Torricelli and Marianna Brunetti

No 350, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: The aim of the present work is to test the predictive power of the term spread in forecasting real economic growth rates and recession probabilities in Italy. According to the most recent literature, the relationship between the term spread and economic growth rates is modelled as a nonlinear one and specifically the Logistic Smooth Transition model is used, while a probit model is implemented to forecast recession probabilities. In both applications evidence supports a relevant informative content of the spread in Italy

Keywords: term structure; term spread; regime prediction (search for similar items in EconPapers)
JEL-codes: C53 E32 E43 (search for similar items in EconPapers)
Date: 2006-07-04
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