IDEAS home Printed from https://ideas.repec.org/a/ids/ijcome/v7y2017i1-2p78-94.html
   My bibliography  Save this article

Forecasting euro area recessions by combining financial information

Author

Listed:
  • Christophe Bellégo
  • Laurent Ferrara

Abstract

The last two macroeconomic recessions in the euro area in 2008-2009 and 2011-2013 have pointed out the impact of financial markets on economic activity. In this paper, we propose to evaluate the ability of a set of financial variables to forecast recessions in the euro area by using binary response models associated with information combination. For various forecast horizons, we provide a readable and leading signal of recession by combining information according to two combining schemes. First we average recession probabilities and second we linearly combine variables through a factor model in order to estimate an innovative Factor-Augmented probit model. Out-of-sample results over the periods 2007-2009 and 2011-2013 show that financial variables would have been helpful in giving accurate and timely recession signals in real-time.

Suggested Citation

  • Christophe Bellégo & Laurent Ferrara, 2017. "Forecasting euro area recessions by combining financial information," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 7(1/2), pages 78-94.
  • Handle: RePEc:ids:ijcome:v:7:y:2017:i:1/2:p:78-94
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=80609
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

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

    Citations

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


    Cited by:

    1. Donato Ceci & Andrea Silvestrini, 2023. "Nowcasting the state of the Italian economy: The role of financial markets," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(7), pages 1569-1593, November.

    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:ids:ijcome:v:7:y:2017:i:1/2:p:78-94. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=311 .

    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.