Dating U.S. Business Cycles with Macro Factors
AbstractA probit model is used to show that latent common factors estimated by principal components from a large number of macroeconomic time series have important predictive power for NBER recession dates. A pseudo out-of-sample forecasting exercise shows that predicted recession probabilities consistently rise during subsequently declared NBER recession dates. The latent variable in the factor-augmented probit model is interpreted as an index of real business conditions which can be used to assess the strength of an expansion or the depth of a recession.
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Bibliographic InfoPaper provided by University of Alberta, Department of Economics in its series Working Papers with number 2011-5.
Length: 35 pages
Date of creation: 01 May 2011
Date of revision:
business cycle; forecasting; factors; probit model; Bayesian methods;
Find related papers by JEL classification:
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
- NEP-BEC-2011-06-18 (Business Economics)
- NEP-CBA-2011-06-18 (Central Banking)
- NEP-ECM-2011-06-18 (Econometrics)
- NEP-FOR-2011-06-18 (Forecasting)
- NEP-ORE-2011-06-18 (Operations Research)
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- Peter Egger & Michael Pfaffermayr, 2011.
"Structural Estimation of Gravity Models with Path-Dependent Market Entry,"
FIW Research Reports series
- Egger, Peter & Pfaffermayr, Michael, 2011. "Structural Estimation of Gravity Models with Path-dependent Market Entry," CEPR Discussion Papers 8458, C.E.P.R. Discussion Papers.
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