Probability forecast of downturn in U.S. economy using classical statistical decision theory

Mostaghimi, Mehdi; Rezayat, Fahimeh

doi:10.1007/bf01175973

Cited by 19 publications

(8 citation statements)

References 16 publications

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“…Gelfand et al, 1976;Press and Allen, 1995, and the references therein). The general methodology was developed by the arti®cial intelligence school of I. M. Gelfand for analysis of rare phenomena of complex origin.…”

Section: Introductionmentioning

confidence: 96%

“…A central problem of macroeconomic forecasting has been the prediction of the onset and end of recessions using time series data on economic indicators; recent contributions include Diebold and Rudebusch (1989), Fair (1993), Stock andWatson (1989, 1993), Sims (1993), Berk and Bikker (1995), and Mostaghimi and Rezayat (1996). At least four features of this problem make this particularly dicult.…”

Section: Introductionmentioning

confidence: 98%

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Pre-recession pattern of six economic indicators in the USA

et al. 2000

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This paper applies a tightly parameterized pattern recognition algorithm, previously applied to earthquake prediction, to the problem of predicting recessions. Monthly data from 1962 to 1996 on six leading and coincident economic indicators for the USA are used. In the full sample, the model performs better than benchmark linear and non-linear models with the same number of parameters. Subsample and recursive analysis indicates that the algorithm is stable and produces reasonably accurate forecasts even when estimated using a small number of recessions.

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Section: Introductionmentioning

confidence: 96%

Section: Introductionmentioning

confidence: 98%

Pre-recession pattern of six economic indicators in the USA

et al. 2000

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“…This methodology for predicting a downturning point in the US economy using CLI is developed in Mostaghimi and Rezayat (1996). It is briefly described below.…”

Section: Classical Statistical Decision Theorymentioning

confidence: 99%

“…More comprehensive statistical evaluations are performed in Mostaghimi and Rezayat (1996) for the classical method, and in Mostaghimi (1997) for the Bayesian method. Mostaghimi (2001Mostaghimi ( , 2003 uses the Bayesian method to evaluate the performance of the new CLI (CLI-96 = 100) versus the old CLI (CLI-82 = 100).…”

Section: Performance Comparison For the Us Economy: 1959-99mentioning

confidence: 99%

“…As a justification for this action, the NBER pointed to a oneand-a-half-year slowdown and decline in the manufacturing sector and a rising unemployment rate. Mostaghimi and Rezayat (1996) and the second methodology is Bayesian, developed in Mostaghimi (1997Mostaghimi ( , 2004a. What these two methodologies have in common are relative entropy information measures (Kullback, 1959), used to model likelihood functions, and the composite leading economic indicators, used to provide information pertaining to the near future state of the US economy.…”

Section: Introductionmentioning

confidence: 99%

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Monetary policy, composite leading economic indicators and predicting the 2001 recession

Mostaghimi

2004

Journal of Forecasting

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On 26 November 2001, the National Bureau of Economic Research announced that the US economy had officially entered into a recession in March 2001. This decision was a surprise and did not end all the conflicting opinions expressed by economists. This matter was finally settled in July 2002 after a revision to the 2001 real gross domestic product showed negative growth rates for its first three quarters. A series of political and economic events in the years 2000-01 have increased the amount of uncertainty in the state of the economy, which in turn has resulted in the production of less reliable economic indicators and forecasts. This paper evaluates the performance of two very reliable methodologies for predicting a downturn in the US economy using composite leading economic indicators (CLI) for the years 2000-01. It explores the impact of the monetary policy on CLI and on the overall economy and shows how the gradualness and uncertainty of this impact on the overall economy have affected the forecasts of these methodologies. It suggests that the overexposure of the CLI to the monetary policy tools and a strong, but less effective, expansionary money policy have been the major factors in deteriorating the predictions of these methodologies. To improve these forecasts, it has explored the inclusion of the CLI diffusion index as a prior in the Bayesian methodology. Copyright © 2004 John Wiley & Sons, Ltd.

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Introducing the Euro Area‐wide Leading Indicator (ALI): Real‐Time Signals of Turning Points in the Growth Cycle from 2007 to 2011

Bondt

Hahn

2013

Journal of Forecasting

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This paper introduces a new monthly euro Area-wide Leading Indicator (ALI) for the euro area growth cycle which is composed of nine leading series and derived from a one-sided bandpass filter. The main findings are that (i) the GDP growth cycle in the euro area can be well tracked, in a timely manner and at monthly frequency, by a reference growth cycle indicator (GCI) derived from industrial production excluding construction, (ii) the ALI reliably leads turning points in the GCI by 5 months and (iii) longer leading components of the ALI are good predictors of the GCI up to 9 months ahead. A real-time case study on the ALI's capabilities for signalling turning points in the euro area growth cycle from 2007 to 2011 confirms these findings.

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Probability forecast of downturn in U.S. economy using classical statistical decision theory

Cited by 19 publications

References 16 publications

Pre-recession pattern of six economic indicators in the USA

Pre-recession pattern of six economic indicators in the USA

Monetary policy, composite leading economic indicators and predicting the 2001 recession

Introducing the Euro Area‐wide Leading Indicator (ALI): Real‐Time Signals of Turning Points in the Growth Cycle from 2007 to 2011

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