Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/120818
Authors: 
Liu, Weiling
Moench, Emanuel
Year of Publication: 
2014
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 691
Abstract: 
We reassess the predictability of U.S. recessions at horizons from three months to two years ahead for a large number of previously proposed leading-indicator variables. We employ an efficient probit estimator for partially missing data and assess relative model performance based on the receiver operating characteristic (ROC) curve. While the Treasury term spread has the highest predictive power at horizons four to six quarters ahead, adding lagged observations of the term spread significantly improves the predictability of recessions at shorter horizons. Moreover, balances in broker-dealer margin accounts significantly improve the precision of recession predictions, especially at horizons further out than one year.
Subjects: 
recession predictability
ROC
term spread
leading indicators
efficient probit estimator
JEL: 
C52
C53
E32
E37
Document Type: 
Working Paper

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