Exploiting NonLinearities in GDP Growth for Forecasting and Anticipating Turning Points

@inproceedings{Dejong2008ExploitingNI,
  title={Exploiting NonLinearities in GDP Growth for Forecasting and Anticipating Turning Points},
  author={David Dejong and Hariharan Dharmarajan and Roman Liesenfeld},
  year={2008}
}
We exploit non-linearities in the behavior of GDP growth to produce forecasts of growth itself, and to anticipate regime changes and NBER-dated turning points. The forecasting model we develop features an error-correction mechanism with a drift component that follows regimespeci…c trajectories. Success in forecasting depends critically on the incorporation of a ‡exible speci…cation that admits wide heterogeneity in trajectories across regimes, including potentially dramatic departures from… CONTINUE READING

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