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Economic activity and Recession Probabilities: spread predictive power in Italy

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  • Costanza Torricelli

    (University of Modena and Reggio Emilia)

  • Marianna Brunetti

    (University of Bergamo)

Abstract

The aim of the present work is to test the predictive power of the term spread in forecasting real economic growth rates and recession probabilities in Italy. According to the most recent literature, the relationship between the term spread and economic growth rates is modelled as a nonlinear one and specifically the Logistic Smooth Transition model is used, while a probit model is implemented to forecast recession probabilities. In both applications evidence supports a relevant informative content of the spread in Italy

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 350.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:350

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Keywords: term structure; term spread; regime prediction;

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