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Predicting the Probability of a Recession with Nonlinear Autoregressive Leading Indicator Models

  • Anderson, H.M.
  • Vahid, F.

We develop nonlinear leading indicator models for GDP growth, with the interest rate spread and growth in M2 as leading indicators. Since policy makers are typically interested in whether or not a recession is imminent, we evaluate these models according to their ability to predict the probability of a recession. Using data for the United States, we find that conditional on the spread, the marginal contribution of M2 growth in predicting recessions is negligible.

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File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2000/wp3-00.pdf
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Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 3/00.

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Length: 29 pages
Date of creation: Mar 2000
Date of revision:
Handle: RePEc:msh:ebswps:2000-3
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