Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257276 
Authors: 
Year of Publication: 
2021
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 9 [Issue:] 3 [Article No.:] 118 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-14
Publisher: 
MDPI, Basel
Abstract: 
Extending earlier research on forecasting recessions with financial variables, I examine the importance of additional financial variables and temporal dependence for recession prediction. I show that both additional financial variables, in particular, the Treasury bill spread, default yield spread, stock return volatility, and temporal cubic terms, which account for temporal dependence, independently help to improve not only in-sample, but also out-of-sample recession prediction. I also find that additional financial variables and temporal cubic terms complement each other in enhancing the predictability of recessions, increasing the explanatory power and decreasing prediction error further, compared to their individual performance.
Subjects: 
financial variables
recession forecasting
temporal dependence
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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