Predicting U.S. Recessions: Financial Variables as Leading Indicators
AbstractThis article examines the performance of various financial variables as predictors of subsequent U.S. recessions. Series such as interest rates and spreads, stock prices, currencies, and monetary aggregates are evaluated singly 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 1-2 quarter horizons, as are some well-known macroeconomic indicators. Beyond 2 quarters, the slope of the yield curve emerges as the clear choice, and typically performs better by itself out of sample than in conjunction with other variables.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5379.
Date of creation: Dec 1995
Date of revision:
Publication status: published as Review of Economics and Statistics, vol.80, no.1, pp. 45-61, February 1998.
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- 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, 1996. "Predicting U.S. recessions: financial variables as leading indicators," Research Paper 9609, Federal Reserve Bank of New York.
- 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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