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Data patterns that reliably precede US recessions

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  • Edward E. Leamer

Abstract

This paper proposes a method of forecasting US recessions beginning with data displays that contain the last 12 quarters of seven US expansions. These end‐of‐expansion displays allow observers to see for themselves what is different about the last year before recessions compared with the two earlier years. Using a statistical model that treats this historical data as draws from a 12‐dimensional multivariate normal distribution, the most recent data are probabilistically inserted into these images where the recent data are most like the historical data. This is a recession forecast based not on presumed patterns but on patterns revealed by the data.

Suggested Citation

  • Edward E. Leamer, 2024. "Data patterns that reliably precede US recessions," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(7), pages 2522-2539, November.
    • Handle: RePEc:wly:jforec:v:43:y:2024:i:7:p:2522-2539
    DOI: 10.1002/for.3140
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    References listed on IDEAS

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    1. Manfred Keil & Edward Leamer & Yao Li, 2023. "An investigation into the probability that this is the last year of the economic expansion," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(5), pages 1228-1244, August.
    2. Edward E. Leamer, 2015. "Housing Really Is the Business Cycle: What Survives the Lessons of 2008–09?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 43-50, March.
    3. Estrella, Arturo & Hardouvelis, Gikas A, 1991. "The Term Structure as a Predictor of Real Economic Activity," Journal of Finance, American Finance Association, vol. 46(2), pages 555-576, June.
    4. Edward E. Leamer, 2009. "Macroeconomic Patterns and Stories," Springer Books, Springer, number 978-3-540-46389-4, January.
    5. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
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