This paper presents a Bayesian methodology for estimating probability of a downturn in the economy and applies it to the 2007-2008 state of the U.S. economy with the focus on investigating the occurrence of a recession. In the methodological development, information theory (Kullback and Shannon)...

In an attempt to predict a peak in the US economy using a classical statistical decision methodology and a Bayesian methodology and using the 1996 revised composite leading economic indicators (CLI), it is learned that the Bayesian models have generally outperformed the classical statistical...