Forecasting of Recessions via Dynamic Probit for Time Series: Replication and Extension of Kauppi and Saikkonen (2008)

Park, Byeong U.;Simar, LĂ©opold;Zelenyuk, Valentin
(2018) , 15 pages

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In this work we first replicate the results of fully parametric dynamic probit model for forecasting US recessions from Kauppi and Saikkonen (2008) (which is in the spirit of Estrella and Mishkin (1995, 1998) and Dueker (1997)) and then contrast them to results from nonparametric local-likelihood dynamic choice model for the same data. We then use expanded data to get some insights on whether these models could have warned the public about the latest recession, associated with the global financial crisis. Finally, we also apply both approaches to get some insights about 2018.
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Park, B. U., Simar, L., & Zelenyuk, V. (2018). Forecasting of Recessions via Dynamic Probit for Time Series: Replication and Extension of Kauppi and Saikkonen (2008) (ISBA Discussion Paper 2018/04). https://hdl.handle.net/2078.5/172806