Is the U.S. Recession Over Yet

CREFC Economic Letter, No. 2002-01, March 20, 2002

4 Pages Posted: 4 Jun 2002

See all articles by Marcelle Chauvet

Marcelle Chauvet

University of California Riverside


As of March 2002 the U.S. economy is already showing signs of breaking out of the 2001 recession. However, the NBER announced in February 2002 that "the Committee will wait until a substantial period of expansion has elapsed before declaring that a turning point in the economy is a true trough, marking the end of a recession." Thus, the NBER dating procedure can not be used in real time. This raises some questions: How can we assess whether a recession is over until the NBER announces its decision? Are there models that can date business cycles in real time? Univariate Markov switching models and Dynamic Factor models with regime switching yield estimated probabilities or recessions and expansions that are very similar to the NBER dating. Thus, these formal analytic models can be useful to monitor turning points and evaluate forecasts in real time, overcoming delays inherent to the NBER dating procedure. In particular, these models can be used to assess when the 2001 U.S. recession actually started and whether the recession is over yet. Regarding the beginning of the recession, the models indicate that the NBER Committee was right on target -- that is, March 2001 was the beginning of the recession. With respect to the the possible end of the recession, the models indicate that the recession has already ended, using information available up to March 2002. A conservative estimate places the trough of the recession in February 2002 whereas an optimistic forecast places the end of the recession in January 2002.

Keywords: Business cycle, turning points, Markov switching, Dynamic Factor, Real Time Forecast

JEL Classification: C32, E32

Suggested Citation

Chauvet, Marcelle, Is the U.S. Recession Over Yet. CREFC Economic Letter, No. 2002-01, March 20, 2002. Available at SSRN: or

Marcelle Chauvet (Contact Author)

University of California Riverside ( email )

900 University Avenue
4136 Sproul Hall
Riverside, CA 92521
United States
(951) 827-1587 (Phone)

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