This paper examines the predictive content of coincident variables for monitoring U.S. recessions in the presence of instabilities. We propose several specifications of a probit model for classifying phases of the business cycle. We find strong evidence in favor of the ones that allow for the...

A probit model is used to examine the stability of the predictive content of the term structure in forecasting U.S. recessions. In particular, we compare forecasts of a recession under different assumptions regarding the presence of a structural break. We find strong evidence of the existence of...

We construct a New Keynesian DSGE model that features financial frictions, investment frictions, long-run productivity risk, and Epstein and Zin (1989) preferences. The model successfully reproduces key features of both asset prices and macroeconomic quantities. Under this set up, we examine the...