Sources of turning point forecast errors
- 1 August 1998
- journal article
- research article
- Published by Taylor & Francis in Applied Economics Letters
- Vol. 5 (8) , 519-521
- https://doi.org/10.1080/135048598354465
Abstract
Little attention has been devoted to explaining the failure to predict the turning points at the beginning of recessions. This note builds on a model that showed that a turning point might not be predicted if forecasters' prior probabilities of a recession were low. Costs associated with various types of errors might also produce this result. A model is developed and then applied to a particular US business cycle indicator. The results show that costs as well as priors may contribute to this type of forecasting error.Keywords
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