The 2001 US recession: what did recession prediction models tell us?
How predictable was the recent US recession? This paper evaluates the accuracy of several recession prediction models. In particular, traditional rule-of-thumb models using the composite index of leading indicators (CLI), Neftçi's sequential probability model, a probit model, and Stock and Watson's experimental recession indexes are compared. Despite the relatively mild depth of the recession, the models using the CLI performed particularly well. The results are robust across different types of models and with respect to the use of real-time data. The strong real-time performance stands at odds with earlier sceptical claims about the marginal usefulness of the CLI in predicting cyclical turning points, and complements the results in the earlier research of Filardo (1999). At a more conceptual level, the paper provides general support to the classical business cycle view that turning points of business cycles from expansion to recession are complex, possibly endogenous and nonlinear, phenomena. The results also suggest that the impressive insights of Geoffrey Moore into the theory and construction of the CLI will continue to shape our understanding of business cycles well into the future.
|Date of creation:||Mar 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (41) 61 - 280 80 80
Fax: (41) 61 - 280 91 00
Web page: http://www.bis.org/
More information through EDIRC
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.:
- Kling, John L, 1987. "Predicting the Turning Points of Business and Economic Time Series," The Journal of Business, University of Chicago Press, vol. 60(2), pages 201-38, April.
- Robert H. McGuckin & Ataman Ozyildirim & Victor Zarnowitz, 2000.
"The Composite Index of Leading Economic Indicators: How to Make it More Timely,"
Economics Program Working Papers
00-04, The Conference Board, Economics Program.
- Robert H. McGuckin & Ataman Ozyildirim & Victor Zarnowitz, 2001. "The Composite Index of Leading Economic Indicators: How to Make It More Timely," NBER Working Papers 8430, National Bureau of Economic Research, Inc.
- Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, December.
- Evan F. Koenig & Kenneth M. Emery, 1994.
"Why The Composite Index Of Leading Indicators Does Not Lead,"
Contemporary Economic Policy,
Western Economic Association International, vol. 12(1), pages 52-66, 01.
- Evan F. Koenig & Kenneth M. Emery, 1993. "Why the composite index of leading indicators doesn't lead," Research Paper 9318, Federal Reserve Bank of Dallas.
- Gordon, S.F. & Filardo, A.J., 1993.
"Business Cycle Durations,"
9328, Laval - Recherche en Politique Economique.
- 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:bis:biswps:148. 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: (Christian Beslmeisl)
If references are entirely missing, you can add them using this form.