Bank of Italy paper compares US recession-forecasting methods

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A composite index of macroeconomic uncertainty beats other methods of predicting US recessions at horizons of seven months or under, a working paper published by the Bank of Italy says.

In Forecasting US recessions: the role of economic uncertainty, Valerio Ercolani and Filippo Natoli compare the effectiveness of several different methods of predicting economic downturns.

They apply a probit statistical measurement method to one of the most widely used sets of variables, the yield curve, as

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