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...

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...

This paper develops two conditionally heteroscedastic models which allow an asymmetric reaction of the conditional volatility to the arrival of news. Such a reaction is induced by both the sign of past shocks and the size of past unexpected volatility. The proposed models are shown to converge...

We use the risk neutral volatilities which market participants use to price dollar, euro and pound swaptions to the aim of assessing the size and the sign of the daily compensation for interest rate volatility risk between October 1998 and August 2006. The measurement of the unobservable...

Industrial production is analysed for three countries. A GARCH framework is employed to model the conditional variances of the cycles, which are found to react asymmetrically to shocks of opposite sign; one of the three cases exhibits long-memory features. The ability of GARCH models at...