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Structural break threshold VARs for predicting US recessions using the spread
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Galvão, Ana Beatriz (2006) Structural break threshold VARs for predicting US recessions using the spread. Journal of Applied Econometrics, 21 (4). pp. 463-487. doi:10.1002/jae.840 ISSN 0883-7252.
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Official URL: http://dx.doi.org/10.1002/jae.840
Abstract
This paper proposes a model to predict recessions that accounts for non-linearity and a structural break when the spread between long- and short-term interest rates is the leading indicator. Estimation and model selection procedures allow us to estimate and identify time-varying non-linearity in a VAR. The structural break threshold VAR (SBTVAR) predicts better the timing of recessions than models with constant threshold or with only a break. Using real-time data, the SBTVAR with spread as leading indicator is able to anticipate correctly the timing of the 2001 recession.
Item Type: | Journal Article | ||||
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Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
Journal or Publication Title: | Journal of Applied Econometrics | ||||
Publisher: | Wiley-Blackwell Publishing, Inc | ||||
ISSN: | 0883-7252 | ||||
Official Date: | May 2006 | ||||
Dates: |
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Volume: | 21 | ||||
Number: | 4 | ||||
Page Range: | pp. 463-487 | ||||
DOI: | 10.1002/jae.840 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access |
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