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Marcelle Chauvet

Professor of Economics
Marcelle Chauvet
Economic Forecasting
Economic growth in the U.S. has become significantly less volatile since 1984 and recessions are occurring less frequently. However, when they do occur, Chauvet’s research and real-time recession prediction model will help guide national and international government and business leaders to develop fiscal policies that are responsive to the current economic cycles.

Areas of Expertise

Areas of Expertise:
  • Recession Forecasting/Economic Policy
  • Macroeconomics
  • Financial Markets
  • Latin American Economics
  • Development and Growth
College: Affiliations: Press Release/Article: Profiles:

Select Honors and Distinctions

  • Pronex-University of Brasilia (1998-2000)
  • Pronex-Graduate School of Economics at Getulio Vargas Foundation (1997-2000)
  • CNPq-Brazilian Council for Scientific & Technological Research

Research Summary

Using probabilities and computer analyses of the economy to measure and explain business cycles and monetary policy and modeling risk premium on financial assets and their interactions with the real economy to understand the dynamics of long-run growth and development.

Q&A

Q: What is the ultimate goal of your research?
One of the main goals of my research is to model and predict economic recessions and booms, financial and currency crises, at the national or global level. The models give early signals of crises, which allows for preemptive actions and policies by the government and economic agents.

Q: Your recession prediction model has proved to be very accurate and produces results months sooner than the federal government. How did you come to develop the model?
The model is a statistical formalization of what historically has been the subjective consensus on business cycles. It summarizes the information on cyclical movements in several sectors of the economy, but in a formal framework, which can be used to predict recessions in promptly in real time.

In the U.S., the beginning and end of recessions are determined by the National Bureau of Economic Research (NBER) Business Cycle Dating Committee. This committee has been dating business cycles in the U.S. since the early 1980s, and their chronology of the cycles is such a well-known benchmark that is it is considered “official” by most economists. In order to make decisions about the beginning and end of recessions, the NBER uses the monthly series manufacturing and trade sales, personal income less transfer payments, industrial production, and employment, in addition to the quarterly data on Gross Domestic Product (GDP).

In the model that I have developed I use these same variables. The benchmark recession model that I use is based on a dynamic factor that extracts information regarding common cyclical moments underlying these series. The model allows this factor to switch between two regimes — recession or expansion, and generates probabilities that the economy is in one of these phases.

Q: Who is using your model, and how is it influencing U.S. policy-makers charged with righting and growing the economy?
The results of the model are being used by investors, producers, the government and researchers in the U.S. and abroad. I post the probabilities of recession in the U.S. and in Brazil on my webpage on a monthly basis, and it gets thousands of hits from worldwide locations around the time of the release.

The model has been extended and is being used by several Central Banks around the world including the Federal Reserve Board in the U.S., the Bank of Spain, the European Central Bank, Bank of France, Central Bank of Brazil, among several others. It is also being used by many governmental institutions here and abroad. In Brazil, I am one of the members of the Brazilian Business Cycle Dating Committee, and the model is one of the tools used to date business cycles there.

Q: You have been a visiting scholar and researcher for the Federal Reserve Bank of Atlanta. How has your work influenced U.S. policies and/or the U.S. economy?
While I was at the Atlanta Fed, the model was used by the Research Department to inform monetary policy.

Q: Brazil has become a major player in the global economy. How has your consulting work with the Central Bank of Brazil influenced that nation’s economic policies?
I built leading indicators of inflation and leading indicators of recessions. At that time the Central Bank of Brazil was adopting the very successful inflation targeting regime, and the leading indicator of inflation was/is instrumental as it allows preemptive monetary policy actions by the Central Bank of Brazil to avoid deviations of inflation from its target.
Marcelle Chauvet “This is the most exciting time to be an economist. We are just coming out of a major crisis that will take years to be fully understood.”

—Marcelle Chauvet
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