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Ex ante forecasts of business-cycle turning points

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Abstract

This paper presents a logit model that accurately forecasts business-cycle turning points with a lead of one-quarter. The sample period consists of an initialization subset (1959:Q3–1975:Q4), and a subset for out-of-sample forecast evaluation (1976:Q1–2005:Q4). In contrast with the record of disappointing results in the literature, the model correctly forecasts all turning points in the test subset without forecasting recessions that did not occur.

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Authors and Affiliations

  1. Finance Department College of Business, University of Houston-Downtown, One Main Street, Houston, TX, 77002, USA

    Rolando F. Pelàez

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  1. Rolando F. Pelàez
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Correspondence to Rolando F. Pelàez.

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Pelàez, R.F. Ex ante forecasts of business-cycle turning points. Empirical Economics 32, 239–246 (2007). https://doi.org/10.1007/s00181-006-0083-4

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  • DOI: https://doi.org/10.1007/s00181-006-0083-4

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