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@article{DeJong2005ANF, title={A Nonlinear Forecasting Model of GDP Growth}, author={D. DeJong and Roman Liesenfeld and J. Richard}, journal={Review of Economics and Statistics}, year={2005}, volume={87}, pages={697-708} }

- Published in Review of Economics and Statistics 2005
DOI:10.1162/003465305775098152

We develop a model of GDP growth under which regime changes are triggered stochastically by an observable tension index, constructed as the geometric sum of deviations of actual GDP growth from a corresponding sustainable rate. Within expansionary regimes, the tension index tends to increase, which heightens the probability of a regime change. Given a regime change, the process becomes reversed, and the tension index begins to decline along a newly established path. Linking the behavior of the… CONTINUE READING