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Consumer Confidence And The Probability Of Recession: A Markov Switching Model

Author

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  • Roy Batchelor

    (Delhi School of Economics)

  • Pami Dua

    (Delhi School of Economics)

Abstract

This paper uses a recursive Hamilton filter to establish whether and how the Conference Board indexes of consumer confidence can help predict the ends of booms and recessions. Switching points in the overall consumer confidence index consistently lead switching points in the US coincident indicator, though the lead time varies greatly from one cycle to the next. The expectations components of the index are too noisy, particularly in the recent past, to be helpful on their own. And simple versions of the filter produce better ex ante predictions than more complex versions.

Suggested Citation

  • Roy Batchelor & Pami Dua, 1997. "Consumer Confidence And The Probability Of Recession: A Markov Switching Model," Working papers 47, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:47
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    References listed on IDEAS

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