Two consecutive quarters of negative GDP growth is a commonplace rule of thumb for defining recessions, but the original conception of recessions is not captured by this simple definition. As some people have disagreed with my description (see [1]), it might be useful to review how recessions are defined in the US (with associated drawbacks), and in other economies.
Category Archives: recession
Additional Graphs for Econ 435 Lecture
In anticipation of Jim Hamilton‘s talk this Wednesday, I’m going to talk a little about recessions in today’s lecture. Here are some data to keep in mind:
Freight Shipping Growth and Recession Probability
Prob(recessiont) = -1.925 – 16.10 freightgrowtht + ut
McFadden R2 = 0.51 NObs = 235 (2000M01-2019M07). Coefficients significant at 5% msl bold.
“Predicting the Next Recession” with James Hamilton
I’ll be at this UW Dept of Economics event, in order to learn what awaits us all…
(Actually, it’s required attendance for my Financial System course.)
Registration information here.
Estimated Probability of Recession in August 2020 = 49% 51%
…using plain vanilla 10yr-3mo probit regression, over 1986M01-2019M08 period, using data shown below in Figure 1 [corrections to data, update results 9/5]
RV Sales and Recession in 2020?
In an earlier post from last December, I noted the correlation between growth in RV sales and recession. Extrapolating October YTD data for 2018 as a whole, I obtained 11% probability of recession. Extrapolating June YTD data for 2019 (thanks to reader AS for compiling the time series data), I obtain 70% probability of recession for 2020.
An Ad Hoc Term Premium Adjusted Term Spread Recession Model
One criticism of the use of the term spread model to forecast recession in current times is that this time is different. [1] [2] [3] In particular, due to quantitative easing, the term premium is lower than in past episodes. Hence, in this interpretation, an inverted yield curve no longer signals as much future depressed interest rates as in the past.
Intraday PredictIt Probability of Recession Hits 46%
Hit that value earlier today, before dropping to 42% (recession in Trump’s first term, that is)
Prediction Markets on Recession by January 2021
PredictIt, accessed 4pm Pacific today:
Who’s Forecasting a (Technical*) Recession?
I keep on hearing that economists are lousy at forecasting, citing the An, Jalles, and Loungani (2018) analysis. Recently, we heard Larry Kudlow claim that nobody was predicting a recession in December 2007, when he was dismissing the possibility. Without disputing the consensus is lousy at detecting turning points in real time, we can check if all economists are.