How likely is a recession in the United States? Predicting a recession is difficult, but one can make some nice money with a good forecast. So let’s focus on the most important recessionary models developed by the Fed.
The first model is the smoothed recession probabilities for the United States developed by Marcelle Chauvet and Jeremy Piger based on the research published in the International Economic Review and Journal of Business and Economic Statistics. The odds are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payment enrollment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales.