Predictable recoveries

Cai, Xiaoming, Den Haan, Wouter J. and Pinder, Jonathan (2016) Predictable recoveries. Economica, 83 (330). pp. 307-337. ISSN 0013-0427

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Abstract

A random walk with drift is a good univariate representation of US GDP. This paper shows, however, that US economic downturns have been associated with pre- dictable short-term recoveries and with changes in long-term GDP forecasts that are substantially smaller than the initial drop. To detect these predictable changes, it is important to use a multivariate time series model. We discuss reasons why univariate representations can miss key characteristics of the underlying variable such as predictability, especially during recessions.

Item Type:	Article
Official URL:	http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information:	© 2015 The London School of Economics and Political Science
Library of Congress subject classification:	H Social Sciences > HB Economic Theory Q Science > QA Mathematics
Journal of Economic Literature Classification System:	C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Other Model Applications E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation
Sets:	Collections > Economists Online Research centres and groups > LSE Health and Social Care Research centres and groups > LSE Enterprise
Date Deposited:	01 Feb 2016 10:16
URL:	http://eprints.lse.ac.uk/65188/

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