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A note on predicting recessions in the euro area using real M1

Author

Listed:
  • Jens Boysen-Hogrefe

    () (Kiel Institute for the World Economy)

Abstract

Real M1 is a renowned leading indicator used to forecast real economic activity. This note provides evidence that real M1 is also a suitable recession indicator that gave a clear and early signal for the Great Recession as long as changes in money demand are controlled for.

Suggested Citation

  • Jens Boysen-Hogrefe, 2012. "A note on predicting recessions in the euro area using real M1," Economics Bulletin, AccessEcon, vol. 32(2), pages 1291-1301.
  • Handle: RePEc:ebl:ecbull:eb-11-00730
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P123.pdf
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    References listed on IDEAS

    as
    1. Sauer, Christine & Scheide, Joachim, 1995. "Money, interest rate spreads, and economic activity," Open Access Publications from Kiel Institute for the World Economy 1664, Kiel Institute for the World Economy (IfW).
    2. Marcelle Chauvet & Simon Potter, 2005. "Forecasting recessions using the yield curve," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 24(2), pages 77-103.
    3. Duarte, Agustin & Venetis, Ioannis A. & Paya, Ivan, 2005. "Predicting real growth and the probability of recession in the Euro area using the yield spread," International Journal of Forecasting, Elsevier, vol. 21(2), pages 261-277.
    4. Herb Taylor, 1986. "Deposit Market Deregulation and the Recent Behavior of M1," Eastern Economic Journal, Eastern Economic Association, vol. 12(3), pages 307-312, Jul-Sep.
    5. Brand, Claus & Reimers, Hans-Eggert & Seitz, Franz, 2003. "Forecasting real GDP: what role for narrow money?," Working Paper Series 254, European Central Bank.
    6. Drechsel, Katja & Scheufele, Rolf, 2012. "The performance of short-term forecasts of the German economy before and during the 2008/2009 recession," International Journal of Forecasting, Elsevier, vol. 28(2), pages 428-445.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jens Boysen‐Hogrefe, 2015. "Monetary Aggregates to Improve Early Output Gap Estimates in the Euro Area: An Empirical Assessment," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 34(7), pages 533-542, November.

    More about this item

    Keywords

    Predicting recessions; Probit; narrow money; real M1; euro area;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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