Predicting Cycles in Economic Activity
56 Pages Posted: 14 Apr 2008
Date Written: April 2008
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.
Keywords: Forecasting, turning points, business cycles, economic indicators
JEL Classification: E37
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