We forecast recession probabilities for the United States, Germany and Japan. The predictions are based on the widely-used probit approach, but the dynamics of regressors are endogenized using a VAR. The combined model is called a 'ProbVAR'. At any point in time, the ProbVAR allows to generate...

Previous research has shown that the US business cycle leads the European cycle by a few quarters, and can therefore help predicting euro area GDP. We investigate whether financial variables provide additional predictive power. We use a VAR model of the US and the euro area GDPs and extend it to...

We provide evidence that changes in the equity price and volatility of individual firms (measures that approximate the definition of 'granular shock' given in Gabaix, 2010) are key to improve the predictability of aggregate business cycle fluctuations in a number of countries. Specifically,...

Does capital markets uncertainty affect the business cycle? We find that financial volatility predicts 30% of post-war economic activity in the United States, and that during the Great Moderation, aggregate stock market volatility explains, alone, up to 55% of real growth. In out-of-sample...

Volatilities implied from interest rate swaptions are used to assess the size and the sign of the compensation for volatility risk, for dollar, euro and pound rates at a daily frequency, between October 1998 and August 2006. The measurement of the volatility risk premium rests on a simple model...

Relying on a perspective borrowed from monetary policy announcements and introducing an econometric twist in the traditional event study analysis, we doc- ument the existence of an event risk transfer , namely a significant credit risk transmission from the sovereign to the corporate sector...

We test whether a simple measure of corporate insolvency based on equity return volatility - and denoted as Distance to Insolvency (DI) - delivers better predictions of corporate default than the widely-used Expected Default Frequency (EDF) measure computed by Moody's. We look at the predictive...