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Decision-Making in Hard Times: What is a Recession, Why Do We Care and When Do We Know We Are in One?

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  • Kevin Lee
  • Kalvinder Shields

Abstract

Defining a recessionary event as one which impacts adversely on individuals’ economic well-being, the paper argues that recession is a multi-faceted phenomenon whose meaning differs from person to person as it impacts on their decision-making in real time. It argues that recession is best represented through the calculation of the nowcast of recession event probabilities. A variety of such probabilities are produced using a real-time data set for the US for the period, focusing on the likelihood of various recessionary events through 1986q1-2008q4 and on prospects beyond the end of the sample.

Suggested Citation

  • Kevin Lee & Kalvinder Shields, "undated". "Decision-Making in Hard Times: What is a Recession, Why Do We Care and When Do We Know We Are in One?," Discussion Papers 10/08, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  • Handle: RePEc:not:notcfc:10/08
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    File URL: http://www.nottingham.ac.uk/cfcm/documents/papers/10-08.pdf
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    References listed on IDEAS

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    1. Philip Hans Franses & Herman K. van Dijk & Dick van Dijk, 2005. "On the dynamics of business cycle analysis: editors' introduction," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 147-150.
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    Keywords

    Recession; Probability Forecasts; Real Time.;

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