Open AccessForecasting US recession with the economic policy uncertainty indexes of policy categories
Author(s) -
Kazutaka Kurasawa
Publication year - 2018
Publication title -
economics and business letters
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.197
H-Index - 4
ISSN - 2254-4380
DOI - 10.17811/ebl.6.4.2017.100-109
Subject(s) - recession , probit model , economics , econometrics , great recession , value (mathematics) , economic policy , macroeconomics , statistics , keynesian economics , mathematics
Uncertainty about the future affects economic decisions today since there is an option value to postpone economic decisions. Using the economic policy uncertainty (EPU) indexes of policy categories developed by Baker et al. (2016), this study estimates the probit model to predict the recession probability in the United States, and quantifies the relative significance of the category-specific EPU indexes. The EPU indexes of national security and regulation are found relatively useful as predictors of recession. These category-specific measures of uncertainty provide information about the occurrence of recession that the other variables do not contain.