Predicting U.S. recessions: financial variables as leading indicators
AbstractThis article examines the performance of various financial variables as predictors of U.S. recessions. Series such as interest rates and spreads, stock prices, currencies, and monetary aggregates are evaluated individually and in comparison with other financial and non-financial indicators. The analysis focuses on out-of-sample performance from 1 to 8 quarters ahead. Results show that stock prices are useful with 1-3 quarter horizons, as are some well-known macroeconomic indicators. Beyond 1 quarter, however, the slope of the yield curve emerges as the clear individual choice and typically performs better by itself out of sample than in conjunction with other variables.
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Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Research Paper with number 9609.
Date of creation: 1996
Date of revision:
Other versions of this item:
- Arturo Estrella & Frederic S. Mishkin, 1998. "Predicting U.S. Recessions: Financial Variables As Leading Indicators," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 45-61, February.
- Arturo Estrella & Frederic S. Mishkin, 1995. "Predicting U.S. Recessions: Financial Variables as Leading Indicators," NBER Working Papers 5379, National Bureau of Economic Research, Inc.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
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