Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/335087 
Year of Publication: 
2025
Citation: 
[Journal:] Journal of Business Cycle Research [ISSN:] 2509-7970 [Volume:] 21 [Issue:] 2-3 [Publisher:] Springer International Publishing [Place:] Cham [Year:] 2025 [Pages:] 119-157
Publisher: 
Springer International Publishing, Cham
Abstract: 
This study evaluates whether feature selection improves machine learning forecasts of German business cycles. Using a high-dimensional dataset with 73 indicators, primarily from the OECD Main Economic Indicator Database, covering a period from 1973 to 2023, Sequential Floating Forward Selection (SFFS) is applied to build compact, explainable, and performant models. The focus is on regularized regression models (LASSO, Ridge, Elastic Net) and tree-based classification models (Random Forest, Gradient Boosting and AdaBoost). SFFS yields models with up to eleven indicators that outperform a standard term-spread probit model—especially during Quantitative Easing. Regularized regressions provide the most accurate recession signals. Feature selection increased the forecasting power of tree-based models, while marginally reducing the performance of regression models. The findings contribute to the ongoing discussion on the use of machine learning in economic forecasting, especially in the context of limited and imbalanced data.
Subjects: 
Business Cycles
Recession
Forecasting
Machine Learning
JEL: 
C52
C55
E32
E37
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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