We use a machine-learning approach known as Boosted Regression Trees (BRT) to reexamine the usefulness of selected leading indicators for predicting recessions. We estimate the BRT approach on German data and study the relative importance of the indicators and their marginal effects on the...

This study uses Markov-switching models to evaluate the informational content of the term structure as a predictor of recessions in eight OECD countries. The empirical results suggest that for all countries the term spread is sensibly modelled as a two-state regime-switching process. Moreover,...

For the timely detection of business-cycle turning points we suggest to use mediumsized linear systems (subset VARs with automated zero restrictions) to forecast the relevant underlying variables, and to derive the probability of the turning point from the forecast density as the probability...

DSGE (Dynamic stochastic general equilibrium) models are the common workhorse of modern macroeconomic theory. Whereas story-telling and policy analysis were in the forefront of applications since its inception, the forecasting perspective of DSGE models is only recently topical. In this study,...

We perform a comprehensive examination of the recursive, comparative predictive performance of a number of linear and non-linear models for UK stock and bond returns. We estimate Markov switching, threshold autoregressive (TAR), and smooth transition autoregressive (STR) regime switching models,...

The debate on the forecasting ability in economics of non-linear models has a long history, and the Great Recession provides us with an opportunity for a re-assessment of the forecasting performance of several classes of non-linear models, widely used in applied macroeconomic research. In this...

This paper introduces new weighting schemes for model averaging when one is interested in combining discrete forecasts from competing Markov-switching models. In the empirical application, we forecast U.S. business cycle turning points with state-level employment data. We find that forecasts...

We estimate a Markow-switching dynamic factor model with three states based on six leading business cycle indicators for Germany preselected from a broader set using the Elastic Net soft-thresholding rule. The three states represent expansions, normal recessions and severe recessions. We show...