Forecasting Recession and Slow-Down Probabilities with Markov Switching Probabilities as Right-Hand-Side Variables

摘要

Forecasting the likelihood of recessions and slowdowns is an important issue for many who use economics in business. While there has been a large and growing body of literature on the likelihood or recessions, there has been little on slow-downs.. This paper presents a new method that uses Markov switching probabilities as right-hand-side variables. The advantages of doing so are described, as are the results of empirical work. These results suggest that the approach presented here is worth adding to economists' tool kits.