CFE 2020: Start Registration
View Submission - CFE
A0207
Title: Binary conditional forecasts Authors:  Michael McCracken - Federal Reserve Bank of St. Louis (United States) [presenting]
Michael Owyang - Federal Reserve Bank of St Louis (United States)
Joseph McGillicuddy - independent (United States)
Abstract: While conditional forecasting has become prevalent both in the academic literature and in practice (e.g., bank stress testing, scenario forecasting), its applications typically focus on continuous variables. We merge elements from the literature on the construction and implementation of conditional forecasts with the literature on forecasting binary variables. We use the Qual-VAR, whose joint VAR-probit structure allows us to form conditional forecasts of the latent variable which can then be used to form probabilistic forecasts of the binary variable. We apply the model to forecasting recessions in real-time and investigate the role of monetary and oil shocks on the likelihood of two U.S. recessions.