FRB: Predicting Cycles in Economic Activity

International Finance Discussion Papers

Predicting Cycles in Economic Activity
Jane Haltmaier
2008-926 (April 2008)

Abstract: Predicting cycles in economic activity is one of the more challenging but important aspects of economic forecasting. This paper reports the results from estimation of binary probit models that predict the probability of an economy being in a recession using a variety of financial and real activity indicators. The models are estimated for eight countries, both individually and using a panel regression. Although the success of the models varies, they are all able to identify a significant number of recessionary periods correctly.

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Keywords
Forecasting, turning points, business cycles, economic indicators

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Last update: April 8, 2008