The equity premium follows a pronounced v-shape pattern around the beginning of recessions. It sharply drops into negative territory just before business cycle peaks and then strongly recovers as the recession unfolds. Recessions are preceded by an inverted yield curve. Thus probit models using...

In this paper a dynamic probit model for recession forecasing under pseudo-real time is set up using a large set of macroeconomic and financial monthly indicators for Germany. Using different initial sets of explanatory variables, alternative dynamic probit specifications are obtained through an...