An investigation into the probability that this is the last year of the economic expansion

The paper finds determinants for the end of U.S. economic expansions since 1960 using a binary variable approach. Different from previous studies, we specify a left‐hand side variable that is coded as one during the year prior to NBER dated recessions rather than during recessions. We thereby avoid...

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Veröffentlicht in:	Journal of forecasting 2023-08, Vol.42 (5), p.1228-1244
Hauptverfasser:	Keil, Manfred, Leamer, Edward, Li, Yao
Format:	Artikel
Sprache:	eng
Schlagworte:	forecasting Interest rates leading economic indicators Probability recession Recessions Specification
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creator	Keil, Manfred Leamer, Edward Li, Yao
description	The paper finds determinants for the end of U.S. economic expansions since 1960 using a binary variable approach. Different from previous studies, we specify a left‐hand side variable that is coded as one during the year prior to NBER dated recessions rather than during recessions. We thereby avoid confounding the occurrence of a recession with its length. We limit the sample by excluding recession periods and the recovery months during the subsequent expansions. This eliminates contamination of the conclusions by taking out observations for which subsequent recessions are unlikely. The resulting specification with the interest rate spread as a predictor outperforms the traditionally used equation and is robust against alternative specifications regarding the warning period.
doi_str_mv	10.1002/for.2939
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subjects	forecasting Interest rates leading economic indicators Probability recession Recessions Specification
title	An investigation into the probability that this is the last year of the economic expansion
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