Predicting U.S. Recessions: Financial Variables as Leading Indicators

This paper examines the out-of-sample performance of various financial variables as predictors of U.S. recessions. Series such as interest rates and spreads, stock prices, and monetary aggregates are evaluated individually and in comparison with other financial and nonfinancial indicators. The analy...

Full description

Saved in:
Bibliographic Details
Published in:The review of economics and statistics 1998-02, Vol.80 (1), p.45-61
Main Authors: Estrella, Arturo, Mishkin, Frederic S.
Format: Article
Language:English
Subjects:
Analytical forecasting
Consumer Price Index
Economic forecasting
Economic forecasts
Economic indicators
Economic recessions
Economics
Finance
Leading indicators
Macroeconomics
Modeling
Recessions
Statistical analysis
Stock exchanges
Stock market indices
Stock prices
Studies
Yield curves
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper examines the out-of-sample performance of various financial variables as predictors of U.S. recessions. Series such as interest rates and spreads, stock prices, and monetary aggregates are evaluated individually and in comparison with other financial and nonfinancial indicators. The analysis focuses on out-of-sample performance from one to eight quarters ahead. Results show that stock prices are useful with one- to three-quarter horizons, as are some well-known macroeconomic indicators. Beyond one quarter, however, the slope of the yield curve emerges as the clear individual choice and typically performs better by itself out of sample than in conjunction with other variables.
ISSN:0034-6535
1530-9142
DOI:10.1162/003465398557320