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Using Macro-Financial Variables To Forecast Recessions. An Analysis Of Canada, 1957-2002

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  • Khurshid M. KIANI

    ()

  • Terry L. KASTENS

    ()

Abstract

We employ artificial neural networks using macro-financial variables to predict recessions. We model the relationship between indicator variables and recessions to periods into the future and employ a procedure that penalizes a misclassified recession more than a misclassified non-recession. Our results reveal that among 16 models that we constructed from indicator variables and their combinations, the indicator variables Spread, -year bond rates, -year bond rates, monetary base, industrial production are candidate variables for predicting recessions ranging to periods in the future. However, most indicator variables become candidate for predicting recessions when misclassified recessions are penalized heavily than misclassified non-recessions.

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 6 (2006)
Issue (Month): 3 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:6:y:2006:i:3_7

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Related research

Keywords: business cycles; neural networks; out-of-sample forecasts; recession; real GDP;

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References

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Cited by:
  1. Khurshid M. Kiani, 2009. "Asymmetries in Macroeconomic Time Series in Eleven Asian Economies," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 8(1), pages 37-54, April.

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