Financial cycle useful for forecasting recessions – BIS paper

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The financial cycle is a useful basis for forecasting recessions and can generate more accurate predictions than standard methods, research published by the Bank for International Settlements finds.

Claudio Borio, Mathias Drehmann and Dora Xia say they seek to fill a gap in the literature, which to date has explored the real-economy implications of financial cycles without doing much to develop financial cycle-based early-warning indicators.

They run a “horse race” between several financial

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