Predicting German Recessions with a Composite Real-Time Dynamic Probit Indicator

Christian ProañoThomas Theobald
Written By SCEPA

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This paper proposes a compositie indicator for real-time recession forecasting based on alternative dynamic probit models.

Alternative dynamic probit regressions are specified through automatized general-to-specific as well as specific-to-general lag selection procedues on the basis of slightly different initial sets. As it is shown, this does not only feature good in-sample forecast statistics, but has also good out-of-sample performance, as a real-time evaluation exercise shows.

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