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Do recessions and bear markets occur concurrently across countries? a multinomial logistic approach

Poon, Aubrey, Zhu, Dan (2024) Do recessions and bear markets occur concurrently across countries? a multinomial logistic approach. Journal of Financial Econometrics, . Article Number nbae003. ISSN 1479-8409. E-ISSN 1479-8417. (doi:10.1093/jjfinec/nbae003) (KAR id:105077)

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We introduce a novel multinomial logistic model for detecting and forecasting concurrent recessions and bear markets across multiple countries. Our framework leverages cross-country panel features, and provide additional information for robust analysis. Through a comprehensive simulation study, we demonstrate the computational efficiency and accuracy of our model, even when handling multiple binary indicators. Applying our framework to empirical data from the US, UK, and Euro Area, we find that the multinomial logistic model produces superior medium-term forecasting of concurrent recession and bear market events across countries compared to multiple independent single logistic models. Additionally, our counterfactual analysis reveals that specific events, such as a recession and bear market in the US, along with the tightening of financial conditions and a negative interest rate spread in the US, increase the probability of concurrent and individual recession and bear market occurrences in the UK and Euro Area.

Item Type: Article
DOI/Identification number: 10.1093/jjfinec/nbae003
Uncontrolled keywords: recession prediction; bear markets; multinomial logistic; cross-country; mixed frequency; Bayesian estimation
Subjects: H Social Sciences
H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Funders: University of Kent (
Depositing User: Aubrey Poon
Date Deposited: 22 Feb 2024 12:33 UTC
Last Modified: 10 Apr 2024 15:29 UTC
Resource URI: (The current URI for this page, for reference purposes)

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