The Current Depth-of-Recession and Unemployment-Rate Forecasts
Building upon Beaudry and Koop's (1993) analysis, we consider a "current depth of the recession" (CDR) variable in modeling the time-series behavior of the postwar quarterly U.S. unemployment rate. The CDR approach is consistent with the state-dependent behavior in the unemployment rate documented in the business-cycle asymmetry literature. We show that while the CDR effect is significant in-sample, no statistically significant out-of-sample forecast improvement is obtained relative to the linear alternative. Augmenting an AR(2) model by inclusion of the CDR term, however, does not significantly worsen the out-of-sample forecast performance.
Year of publication: |
1998
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Authors: | Parker Randall E. ; Philip, Rothman |
Published in: |
Studies in Nonlinear Dynamics & Econometrics. - De Gruyter, ISSN 1558-3708. - Vol. 2.1998, 4, p. 1-10
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Publisher: |
De Gruyter |
Saved in:
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