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An investigation into the probability that this is the last year of the economic expansion

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  • Manfred Keil
  • Edward Leamer
  • Yao Li

Abstract

The paper finds determinants for the end of U.S. economic expansions since 1960 using a binary variable approach. Different from previous studies, we specify a left‐hand side variable that is coded as one during the year prior to NBER dated recessions rather than during recessions. We thereby avoid confounding the occurrence of a recession with its length. We limit the sample by excluding recession periods and the recovery months during the subsequent expansions. This eliminates contamination of the conclusions by taking out observations for which subsequent recessions are unlikely. The resulting specification with the interest rate spread as a predictor outperforms the traditionally used equation and is robust against alternative specifications regarding the warning period.

Suggested Citation

  • Manfred Keil & Edward Leamer & Yao Li, 2023. "An investigation into the probability that this is the last year of the economic expansion," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(5), pages 1228-1244, August.
    • Handle: RePEc:wly:jforec:v:42:y:2023:i:5:p:1228-1244
    DOI: 10.1002/for.2939
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    References listed on IDEAS

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    Cited by:

    1. Priscila Silva & Mariana Hidalgo & Mindy Hotchkiss & Lasitha Dharmasena & Igor Linkov & Lance Fiondella, 2024. "Predictive Resilience Modeling Using Statistical Regression Methods," Mathematics, MDPI, vol. 12(15), pages 1-30, July.
    2. Michaillat, Pascal & Saez, Emmanuel, 2024. "Has the Recession Started?," Santa Cruz Department of Economics, Working Paper Series qt0h0295t7, Department of Economics, UC Santa Cruz.
    3. Edward E. Leamer, 2024. "Data patterns that reliably precede US recessions," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(7), pages 2522-2539, November.
    4. Pascal Michaillat, 2025. "Early and Accurate Recession Detection Using Classifiers on the Anticipation-Precision Frontier," Papers 2506.09664, arXiv.org.

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