Izvorni znanstveni članak
https://doi.org/10.1080/1331677X.2022.2120040
Early bird catches the worm: finding the most effective early warning indicators of recessions
Filip Bašić
Tomislav Globan
Sažetak
The paper examines whether certain macrofinancial indicators
can be used for early detection of recessions. Analysing a sample
of small open economies from Central and Eastern
European Union, we first identify the most important indicators
used for early detection of recessions, and then test the validity
of the selection by using the signal method and multivariate
probit regressions. Our results imply that the most effective
predictors of upcoming recessions are the slope of the yield
curve, current account balance to GDP ratio, real estate price
index, self-financing ratio of commercial banks, nominal effective
exchange rate, global exports and LIBOR rate. Using the
Mann-Whitney U Test, we also find that foreign indicators emit
earlier signals of incoming recessions in analysed countries than
domestic ones. This type of research is important because of
the various stakeholders that base their decisions on the signals
provided by these indicators. Primarily, these are various government
agencies that participate in monetary and fiscal policy
making. Early warning of an impending recession allows economic
policy makers to take corrective action to avoid a recession
or to significantly mitigate its effects, while unreliable
indicators may lead to adoption of unnecessary measures with
adverse effects on the economy.
Ključne riječi
Early warning signals; Mann-Whitney U Test; recession forecasting; Central and Eastern EU; signal method; yield curve
Hrčak ID:
306467
URI
Datum izdavanja:
31.3.2023.
Posjeta: 130 *