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Nonlinear autoregressive leading indicator models of output in G‐7 countries
Author(s) -
Anderson Heather M.,
Athanasopoulos George,
Vahid Farshid
Publication year - 2007
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.935
Subject(s) - autoregressive model , econometrics , recession , business cycle , economics , term (time) , nonlinear system , series (stratigraphy) , nonlinear autoregressive exogenous model , star model , time series , mathematics , autoregressive integrated moving average , statistics , macroeconomics , paleontology , physics , quantum mechanics , biology
This paper studies linear and nonlinear autoregressive leading indicator models of business cycles in G‐7 countries. Our models use the spread between short‐term and long‐term interest rates as leading indicators for GDP. We examine data admissibility by determining whether these models have the ability to produce time series with classical cycles that resemble the observed classical cycles in the data, and then we ask whether this data admissibility lends itself to better predictions of the probability of recession. Copyright © 2007 John Wiley & Sons, Ltd.