CFCM 10/08: Decision-Making in Hard Times: What is a Recession, Why Do We Care and When Do We Know We Are in One?

Abstract

Defining a recessionary event as one which impacts adversely on individuals’ economic well-being, the paper argues that recession is a multi-faceted phenomenon whose meaning differs from person to person as it impacts on their decision-making in real time. It argues that recession is best represented through the calculation of the nowcast of recession event probabilities. A variety of such probabilities are produced using a real-time data set for the US for the period, focusing on the likelihood of various recessionary events through 1986q1-2008q4 and on prospects beyond the end of the sample.

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Published in North American Journal of Economics and Finance, 2011, 22, 1, 43-6

Authors

Kevin Lee and Kalvinder Shields

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