New model accurately predicts recessions, improving economic stability and planning.
The paper looks at how to predict U.S. recessions by using different models that account for changes in the economy. By allowing for these changes, the models can better classify when the economy is growing or shrinking. The models that consider these changes are more accurate at predicting recessions and avoiding false alarms. Overall, these models are better at spotting recessions early on. This shows that taking into account these changes is important for keeping track of the business cycle.