The Current Depth-of-Recession and Unemployment-Rate Forecasts
AbstractBuilding upon Beaudry and Koop's (1993) analysis, we consider a "current depth of the recession" (CDR) variable in modeling the time-series behavior of the postwar quarterly U.S. unemployment rate. The CDR approach is consistent with the state-dependent behavior in the unemployment rate documented in the business-cycle asymmetry literature. We show that while the CDR effect is significant in-sample, no statistically significant out-of-sample forecast improvement is obtained relative to the linear alternative. Augmenting an AR(2) model by inclusion of the CDR term, however, does not significantly worsen the out-of-sample forecast performance.
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Bibliographic InfoArticle provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.
Volume (Year): 2 (1998)
Issue (Month): 4 (January)
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Other versions of this item:
- Randall E. Parker & Philip Rothman, . "The Current Depth of Recession and Unemployment Rate Forecasts," Working Papers 9729, East Carolina University, Department of Economics.
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