IDEAS home Printed from https://ideas.repec.org/a/bpj/sndecm/v2y1998i4n5.html
   My bibliography  Save this article

The Current Depth-of-Recession and Unemployment-Rate Forecasts

Author

Listed:
  • Parker Randall E.

    (East Carolina University East Carolina University)

  • Rothman Philip

    (East Carolina University East Carolina University)

Abstract

Building upon Beaudry and Koop's (1993) analysis, we consider a "current depth of the recession" (CDR) variable in modeling the time-series behavior of the postwar quarterly U.S. unemployment rate. The CDR approach is consistent with the state-dependent behavior in the unemployment rate documented in the business-cycle asymmetry literature. We show that while the CDR effect is significant in-sample, no statistically significant out-of-sample forecast improvement is obtained relative to the linear alternative. Augmenting an AR(2) model by inclusion of the CDR term, however, does not significantly worsen the out-of-sample forecast performance.

Suggested Citation

  • Parker Randall E. & Rothman Philip, 1998. "The Current Depth-of-Recession and Unemployment-Rate Forecasts," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 2(4), pages 1-10, January.
    • Handle: RePEc:bpj:sndecm:v:2:y:1998:i:4:n:5
    DOI: 10.2202/1558-3708.1036
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1558-3708.1036
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1558-3708.1036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April.
    2. Potter, Simon M, 1995. "A Nonlinear Approach to US GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 109-125, April-Jun.
    3. Bruce Mizrach, 1996. "Forecast Comparison in L2," Departmental Working Papers 199524, Rutgers University, Department of Economics.
    4. Bradley, Michael D & Jansen, Dennis W, 1997. "Nonlinear Business Cycle Dynamics: Cross-country Evidence on the Persistence of Aggregate Shocks," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 495-509, July.
    5. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    6. Philip Rothman, 1998. "Forecasting Asymmetric Unemployment Rates," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 164-168, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matthews, Kent & Minford, Patrick & Naraidoo, Ruthira, 2008. "Vicious and virtuous circles -- The political economy of unemployment in interwar UK and USA," European Journal of Political Economy, Elsevier, vol. 24(3), pages 605-614, September.
    2. Bårdsen Gunnar & Hurn Stanley & McHugh Zöe, 2012. "Asymmetric Unemployment Rate Dynamics in Australia," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(1), pages 1-22, January.
    3. Proietti, Tommaso, 2003. "Forecasting the US unemployment rate," Computational Statistics & Data Analysis, Elsevier, vol. 42(3), pages 451-476, March.
    4. Julien Chevallier & Florian Ielpo, 2013. "Cross-market linkages between commodities, stocks and bonds," Applied Economics Letters, Taylor & Francis Journals, vol. 20(10), pages 1008-1018, July.
    5. Das, Anupam & Brown, Leanora & Mcfarlane, Adian, 2023. "Economic Misery and Remittances in Jamaica," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 48(2), pages 33-52, June.
    6. Floros, Ch., 2005. "Forecasting the UK Unemployment Rate: Model Comparisons," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(4), pages 57-72.
    7. Mihai Mutascu & Scott W. Hegerty, 2023. "Predicting the contribution of artificial intelligence to unemployment rates: an artificial neural network approach," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(2), pages 400-416, June.
    8. Skalin, Joakim & Teräsvirta, Timo, 2002. "Modeling Asymmetries And Moving Equilibria In Unemployment Rates," Macroeconomic Dynamics, Cambridge University Press, vol. 6(2), pages 202-241, April.
    9. Chen, Wei-Shing, 2011. "Use of recurrence plot and recurrence quantification analysis in Taiwan unemployment rate time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(7), pages 1332-1342.
    10. Gunnar Bårdsen & Stan Hurn & Zoë McHugh, 2002. "A smooth-transition model of the Australian unemployment rate," Working Paper Series 1002, Department of Economics, Norwegian University of Science and Technology, revised 01 Jul 2003.
    11. Philip Rothman, 1999. "Time Irreversible Unemployment Rates," Working Papers 9903, East Carolina University, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ludlow, Jorge & Enders, Walter, 2000. "Estimating non-linear ARMA models using Fourier coefficients," International Journal of Forecasting, Elsevier, vol. 16(3), pages 333-347.
    2. Yamei Liu & Walter Enders, 2003. "Out‐of‐Sample Forecasts and Nonlinear Model Selection with an Example of the Term Structure of Interest Rates," Southern Economic Journal, John Wiley & Sons, vol. 69(3), pages 520-540, January.
    3. van Dijk, Dick & Hans Franses, Philip & Peter Boswijk, H., 2007. "Absorption of shocks in nonlinear autoregressive models," Computational Statistics & Data Analysis, Elsevier, vol. 51(9), pages 4206-4226, May.
    4. Filippo Altissimo & Giovanni L. Violante, 2001. "The non-linear dynamics of output and unemployment in the U.S," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(4), pages 461-486.
    5. Koop, Gary, 1996. "Parameter uncertainty and impulse response analysis," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 135-149.
    6. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-176, April.
    7. Bradley Michael D. & Jansen Dennis W., 2000. "Are Business Cycle Dynamics the Same across Countries? Testing Linearity around the Globe," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 4(2), pages 1-23, July.
    8. Beatriz C. Galvao, Ana, 2002. "Can non-linear time series models generate US business cycle asymmetric shape?," Economics Letters, Elsevier, vol. 77(2), pages 187-194, October.
    9. H. Peter Boswijk & Philip Hans Franses & Dick van Dijk, 2000. "Asymmetric and Common Absorption of Shocks in Nonlinear Autoregressive Models," Econometric Society World Congress 2000 Contributed Papers 0765, Econometric Society.
    10. Guglielmo Maria Caporale & Luis A. Gil‐Alana, 2007. "Nonlinearities and Fractional Integration in the US Unemployment Rate," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(4), pages 521-544, August.
    11. Balcilar, Mehmet & Hammoudeh, Shawkat & Toparli, Elif Akay, 2018. "On the risk spillover across the oil market, stock market, and the oil related CDS sectors: A volatility impulse response approach," Energy Economics, Elsevier, vol. 74(C), pages 813-827.
    12. Heather M. Anderson, 2002. "Choosing Lag Lengths in Nonlinear Dynamic Models," Monash Econometrics and Business Statistics Working Papers 21/02, Monash University, Department of Econometrics and Business Statistics.
    13. Enders, Walter & Sandler, Todd, 1998. "Transnational Terrorism in the Post-Cold War Era," ISU General Staff Papers 199804010800001308, Iowa State University, Department of Economics.
    14. Bradley, Michael D. & Jansen, Dennis W., 2004. "Forecasting with a nonlinear dynamic model of stock returns and industrial production," International Journal of Forecasting, Elsevier, vol. 20(2), pages 321-342.
    15. Potter, Simon M., 2000. "Nonlinear impulse response functions," Journal of Economic Dynamics and Control, Elsevier, vol. 24(10), pages 1425-1446, September.
    16. Quentin LAJAUNIE, 2021. "Nonlinear Impulse Response Function for Dichotomous Models," LEO Working Papers / DR LEO 2852, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    17. Kalli, Maria & Griffin, Jim E., 2018. "Bayesian nonparametric vector autoregressive models," Journal of Econometrics, Elsevier, vol. 203(2), pages 267-282.
    18. Dijk, Dick van & Franses, Philip Hans, 1999. "Modeling Multiple Regimes in the Business Cycle," Macroeconomic Dynamics, Cambridge University Press, vol. 3(3), pages 311-340, September.
    19. Karamé, Frédéric, 2015. "Asymmetries and Markov-switching structural VAR," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 85-102.
    20. Koop, Gary & Potter, Simon M, 2003. "Bayesian Analysis of Endogenous Delay Threshold Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 93-103, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:sndecm:v:2:y:1998:i:4:n:5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.