The role of coincident information in real-time business cycle forecasting
31 Pages Posted: 9 Feb 2024
Date Written: January 12, 2024
Abstract
The extreme persistence of recessions and expansions has not been fully exploited in recession forecasting since the current state of the business cycle is typically unknown to market participants. We use a state-of-the-art nonparametric nowcasting method to incorporate real-time coincident information about the business cycle into multiple-period-ahead recession forecasts. Pseudo-out-of-sample forecasting results indicate that the nowcasts hold additional incremental predictive power over commonly-used leading indicators such as the term spread for horizons up to 12 months.
Keywords: Recession prediction, real-time, publication lag, nowcasting
JEL Classification: C25, C53, E32
Suggested Citation: Suggested Citation