Home About Latest Browse RSS Advanced Search

Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Forecasting recessions using stall speeds
Jeremy J. Nalewaik
Abstract

This paper presents evidence that the economic stall speed concept has some empirical content, and can be moderately useful in forecasting recessions. Specifically, output tends to transition to a slow-growth phase at the end of expansions before falling into a recession, and the paper designs Markov-switching models that behave in that way. While the switching models using output growth alone produce a considerable number of false positive recession signals, adding the slope of the yield curve, the percent change in housing starts, and the change in the unemployment rate to the model reduces false positives and improves recession forecasting. The switching model is particularly good at forecasting at long horizons, outperforming Blue Chip consensus forecasts.


Download Full text
Download Full text
Cite this item
Jeremy J. Nalewaik, Forecasting recessions using stall speeds, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2011-24, 2011.
More from this series
JEL Classification:
Subject headings:
Keywords: Recessions ; Economic forecasting ; Business cycles ; Markov processes
For corrections, contact Ryan Wolfslayer ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal