Using macro-financial variables to forecast recessions: an analysis of Canada, 1957-2002

• KIANI, Khurshid M. ^[1] ; KASTENS, Terry L. ^[2]
  1. [1] University of the West Indies

     University of the West Indies

     Jamaica

     
  2. [2] Kansas State University

     Kansas State University

     City of Manhattan, Estados Unidos

     
• Localización: Applied econometrics and international development, ISSN 1578-4487, Vol. 6, Nº. 3, 2006, págs. 98-106
• Idioma: inglés
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• Resumen

  • We employ artificial neural networks using macro-financial variables to predict recessions. We model the relationship between indicator variables and recessions to 10 periods into the future and employ a procedure that penalizes a misclassified recession more than a misclassified non-recession. Our results reveal that among the 16 models that we constructed from 9 indicator variables and their combinations, the indicator variables Spread, 3 -year bond rates, 10 -year bond rates, monetary base, industrial production are candidates variables for predicting recessions ranging to 10 periods in the future. However, most indicator variables become candidate for predicting recessions when misclassified recessions are penalized more heavily than misclassified non-recessions