Forecasting recessions: can we do better on MARS?
AbstractA number of recent articles have examined the ability of financial variables to predict recessions. In this article, Peter Sephton extends the literature by considering a non-linear, nonparametric approach to predicting the probability of recession using multivariate adaptive regression splines (MARS). The results suggest that this data-intensive approach to modeling is not a panacea for recession forecasting. Although it does well explaining the data within the sample, its out-of-sample forecasts do not improve upon the benchmark probit specification.
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Bibliographic InfoArticle provided by Federal Reserve Bank of St. Louis in its journal Review.
Volume (Year): (2001)
Issue (Month): Mar ()
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