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The European Way Out of Recessions

Author

Listed:
  • Frédérique Bec

    (THEMA, Universite de Cergy-Pontoise)

  • Othman Bouabdallah

    (Banque de France, DGEI-DCPM)

  • Laurent Ferrara

    (Banque de france, DGEI-DERIE-SEMSI)

Abstract

This paper proposes a two-regime Bounce-Back Function augmented Self-Exciting Threshold AutoRegression (SETAR) which allows for various shapes of recoveries from the recession regime. It relies on the bounce-back effects first analyzed in a Markov-Switching setup by Kim, Morley and Piger [2005] and recently extended by Bec, Bouabdallah and Ferrara [2011a]. This approach is then applied to post-1973 quarterly growth rates of French, German, Italian, Spanish and Euro area real GDPs. Both the linear autoregression and the standard SETAR without bounce-back effect null hypotheses are strongly rejected against the Bounce-Back augmented SETAR alternative in all cases but Italy. The relevance of our proposed model is further assessed by the comparison of its short-term forecasting performances with the ones obtained from a linear autoregression and a standard SETAR. It turns out that the bounce-back models one-step ahead forecasts generally outperform the other ones, and particularly so during the last recovery period in 2009Q3-2010Q4.

Suggested Citation

  • Frédérique Bec & Othman Bouabdallah & Laurent Ferrara, 2011. "The European Way Out of Recessions," THEMA Working Papers 2011-23, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2011-23
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    References listed on IDEAS

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    5. Chang‐Jin Kim & James Morley & Jeremy Piger, 2005. "Nonlinearity and the permanent effects of recessions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 291-309.
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    Cited by:

    1. Frederique Bec & Marie Bessec, 2013. "Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors," Economics Bulletin, AccessEcon, vol. 33(3), pages 2209-2222.
    2. Moritz Cruz, 2015. "The need for official reserves in Latin America: Assessing the precautionary motive, 1995-2011," Revista Cuadernos de Economía, Universidad Nacional de Colombia -FCE - CID, March.

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    More about this item

    Keywords

    Threshold autoregression; bounce-back effects; asymmetric business cycles. JEL classification: E32; C22.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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