Business cycle monitoring with structural changes
This paper examines the predictive content of coincident variables for monitoring US recessions in the presence of instabilities. We propose several specifications of the probit model for classifying phases of the business cycle. We find strong evidence in favor of those that allow for the possibility that the economy has experienced recurrent breaks. The recession probabilities of these models provide a clearer classification of the business cycle into expansion and recession periods, and superior performance in the ability to correctly call recessions and avoid false recession signals. Overall, the sensitivity, specificity, and accuracy of these models are far superior, as is their ability to signal recessions in a timely fashion. The results indicate the importance of considering recurrent breaks for monitoring business cycles.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marcelle Chauvet & Simon M. Potter, 2001.
"Forecasting recessions using the yield curve,"
134, Federal Reserve Bank of New York.
- Marcelle Chauvet & James D. Hamilton, 2005. "Dating Business Cycle Turning Points," NBER Working Papers 11422, National Bureau of Economic Research, Inc.
- M Sensier & D van Dijk, 2003.
"Testing for Volatility Changes in US Macroeconomic Time Series,"
Centre for Growth and Business Cycle Research Discussion Paper Series
36, Economics, The Univeristy of Manchester.
- Marianne Sensier & Dick van Dijk, 2004. "Testing for Volatility Changes in U.S. Macroeconomic Time Series," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 833-839, August.
- Michael J. Dueker, 1998.
"Conditional heteroskedasticity in qualitative response models of time series: a Gibbs sampling approach to the bank prime rate,"
1998-011, Federal Reserve Bank of St. Louis.
- Dueker, Michael, 1999. "Conditional Heteroscedasticity in Qualitative Response Models of Time Series: A Gibbs-Sampling Approach to the Bank Prime Rate," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 466-72, October.
- Margaret M. McConnell & Gabriel Perez-Quiros, 2000.
"Output fluctuations in the United States: what has changed since the early 1980s?,"
Federal Reserve Bank of San Francisco, issue Mar.
- Gabriel Perez-Quiros & Margaret M. McConnell, 2000. "Output Fluctuations in the United States: What Has Changed since the Early 1980's?," American Economic Review, American Economic Association, vol. 90(5), pages 1464-1476, December.
- Margaret M. McConnell & Gabriel Perez Quiros, 1998. "Output fluctuations in the United States: what has changed since the early 1980s?," Staff Reports 41, Federal Reserve Bank of New York.
- Margaret M. McConnell & Gabriel Perez Quiros, 1997. "Output fluctuations in the United States: what has changed since the early 1980s?," Research Paper 9735, Federal Reserve Bank of New York.
- Chauvet, Marcelle & Potter, Simon, 2001.
"Recent Changes in the US Business Cycle,"
University of Manchester, vol. 69(5), pages 481-508, Special I.
- Michael Dueker, 2005.
"Dynamic Forecasts of Qualitative Variables: A Qual VAR Model of U.S. Recessions,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 23, pages 96-104, January.
- Tom Doan, . "RATS programs to replicate Dueker(2005) JBES dynamic probit model," Statistical Software Components RTZ00049, Boston College Department of Economics.
- Michael J. Dueker, 2003. "Dynamic forecasts of qualitative variables: a Qual VAR model of U.S. recessions," Working Papers 2001-012, Federal Reserve Bank of St. Louis.
- John F. Geweke, 1998.
"Using simulation methods for Bayesian econometric models: inference, development, and communication,"
249, Federal Reserve Bank of Minneapolis.
- John Geweke, 1999. "Using simulation methods for bayesian econometric models: inference, development,and communication," Econometric Reviews, Taylor & Francis Journals, vol. 18(1), pages 1-73.
- Gary Koop & Simon M. Potter, 2007. "Estimation and Forecasting in Models with Multiple Breaks," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 763-789.
- Chib, Siddhartha, 2001. "Markov chain Monte Carlo methods: computation and inference," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 57, pages 3569-3649 Elsevier.
- Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, December.
When requesting a correction, please mention this item's handle: RePEc:eee:intfor:v:26:y::i:4:p:777-793. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.