Macroeconomic Forecasting During the Great Recession: The Return of Non-Linearity?

Document de Travail No. 383

36 Pages Posted: 1 Jun 2012

See all articles by Laurent Ferrara

Laurent Ferrara

SKEMA Business School; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA); Université Paris Ouest - Nanterre, La Défense - EconomiX

Massimiliano Giuseppe Marcellino

Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Matteo Mogliani

Banque de France

Multiple version iconThere are 2 versions of this paper

Date Written: May 2012

Abstract

The debate on the forecasting ability in economics of non-linear models has a long history, and the Great Recession provides us with an opportunity for a re-assessment of the forecasting performance of several classes of non-linear models, widely used in applied macroeconomic research. In this paper, we carry out an extensive analysis over a large quarterly database consisting of major real, nominal and financial variables for a large panel of OECD member countries. It turns out that, on average, non-linear models do not outperform standard linear specifications, even during the Great Recession period. In spite of this result, non-linear models enable to improve forecast accuracy in almost 40% of cases. Especially some countries and/or variables appear to be more adapted to non-linear forecasting.

Keywords: Forecasting, Non-linear models, Great Recession

JEL Classification: C22, C53, E37

Suggested Citation

Ferrara, Laurent and Marcellino, Massimiliano and Mogliani, Matteo, Macroeconomic Forecasting During the Great Recession: The Return of Non-Linearity? (May 2012). Document de Travail No. 383, Available at SSRN: https://ssrn.com/abstract=2071176

Laurent Ferrara (Contact Author)

SKEMA Business School ( email )

Paris la Défense, 92916
France

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

Université Paris Ouest - Nanterre, La Défense - EconomiX ( email )

200 Avenue de la République
92000

Massimiliano Marcellino

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Matteo Mogliani

Banque de France ( email )

Paris
France

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