The Financial Cycle and Recession Risk
13 Pages Posted: 29 Jan 2019
Date Written: December 1, 2018
Financial cycle booms can end in crises and, even if they do not, they tend to weaken growth. Given their slow build-up, do they convey information about recession risk? We compare the predictive performance of different financial cycle proxies with that of the term spread - a popular recession indicator. In contrast to much of the literature, our analysis covers a large sample of advanced and emerging market economies. We find that, in general, financial cycle measures provide valuable information and tend to outperform the term spread.
JEL Classification: C33, E37, E44
Suggested Citation: Suggested Citation