A Nonlinear Forecasting Model of GDP Growth

@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}
}
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

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