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Economic activity and Recession Probabilities: spread predictive power in Italy

Author

Listed:
  • Costanza Torricelli

    (University of Modena and Reggio Emilia)

  • Marianna Brunetti

    (University of Bergamo)

Abstract

The aim of the present work is to test the predictive power of the term spread in forecasting real economic growth rates and recession probabilities in Italy. According to the most recent literature, the relationship between the term spread and economic growth rates is modelled as a nonlinear one and specifically the Logistic Smooth Transition model is used, while a probit model is implemented to forecast recession probabilities. In both applications evidence supports a relevant informative content of the spread in Italy

Suggested Citation

  • Costanza Torricelli & Marianna Brunetti, 2006. "Economic activity and Recession Probabilities: spread predictive power in Italy," Computing in Economics and Finance 2006 350, Society for Computational Economics.
    • Handle: RePEc:sce:scecfa:350
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    term structure; term spread; regime prediction;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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