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The Econometric Analysis of Recurrent Events in Macroeconomics and Finance$
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Don Harding and Adrian Pagan

Print publication date: 2016

Print ISBN-13: 9780691167084

Published to Princeton Scholarship Online: January 2018

DOI: 10.23943/princeton/9780691167084.001.0001

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Predicting Turning Points and Recessions

Predicting Turning Points and Recessions

Chapter:
(p.163) Chapter 9 Predicting Turning Points and Recessions
Source:
The Econometric Analysis of Recurrent Events in Macroeconomics and Finance
Author(s):

Don Harding

Adrian Pagan

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691167084.003.0009

This chapter argues that the problems in predicting recessions stem from the nature of the definition of a recession. Much of the literature that claims success does not predict recessions as such. Rather it focuses on either whether one can predict growth in economic activity or whether one can identify the current status of the economy—what is often referred to as “nowcasting” rather than forecasting. The chapter reviews the literature on predicting recessions. The review leads to the conclusion that there are good reasons it is extremely difficult to predict recessions. Understanding these leads to an appreciation of the barriers to be faced in the task, and also suggests that many of the claims made about how the forecasting record can be improved should be treated with skepticism.

Keywords:   economic recessions, prediction, economic activity

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