Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126154
Authors: 
Pirschel, Inske
Year of Publication: 
2016
Series/Report no.: 
Kiel Working Paper 2020
Abstract: 
I present evidence that the linear mixed-frequency Bayesian VAR provides very sharp and well calibrated monthly real-time recession probabilities for the euro area for the period from 2004 until 2013. The model outperforms not only the univariate regime-switching models for a number of hard and soft economic indicators and their optimal linear combinations, but also a real-time recession index obtained with Google Trends data. This result holds irrespective of whether the joint predictive distribution of several economic indicators or the marginal distribution of real GDP growth is evaluated to extract the real-time recession probabilities of the mixed-frequency Bayesian VAR. The inclusion of the confidence index in industry turns out to be crucial for the performance of the model.
Subjects: 
Density nowcasting
Real-time recession forecasting
Mixed-frequency data
Bayesian VAR
Regime-switching models
Linear opinion pool
Google Trends
JEL: 
C53
E32
E37
Document Type: 
Working Paper

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