Leading-Edge Econometric Models Measure Brexit Impact on U.S. Economy
San Diego, California, June 27, 2016 – Intensity Corporation, an economics and data science firm, is predicting that the U.S. recession will start in September 2017, four months sooner than its earlier predicted date of January 2018, based on the impact of the U.K.’s recent decision to leave the European Union.
“Many are asking whether Brexit will cause a U.S. recession and, if so, when that would happen,” said Dr. Ryan Sullivan, CEO of Intensity. “To answer this question, economists typically provide commentary that is based upon their qualitative assessment of myriad economic factors, as driven by their particular research agenda, and updated periodically. However, Intensity has built a more reliable predictive modeling platform than anything else currently available.”
Sullivan continued: as of today, there is a 43% probability of a U.S. recession starting within 12 months, whereas this probability was 27% on Thursday (June 23, 2016) prior to the Brexit vote, according to our models. Thus, the Brexit vote precipitated an increase in the probability of a U.S. recession starting within the next 12 months.
“As of June 27, the interquartile range for the start of the next recession is December 2016 through August 2018,” said Dr. Allan Timmermann, Senior Scientific Advisor for Intensity and former chair of the U.S. Federal Reserve model validation council. “This is the range of dates for which there is a 25% probability of the next recession starting before, and a 25% probability of the next recession starting after. Thus, there is a 50% probability of the next recession starting within the interquartile range. Correspondingly, although the Brexit vote made a recession more likely, given the uncertainty of how this unique event will affect the world economy, there is still considerable uncertainty about when the next US recession will start.”
Intensity’s economists and data scientists performed out-of-sample tests against the past three historical recessions and demonstrated exceptional accuracy. In contrast, alternative approaches typically impose unreliable relationships among economic factors via inflexible models or the opinions of professional forecasters, who are susceptible to cognitive bias and unable to discern high-dimensional, time-varying relationships. The Intensity forecasting models operate at the intersection of economics and big data. Unlike other economic predictions, we harness the full power and discipline of computational modelling that incorporates a breadth of data. We use unbridled analysis to unlock important information from data.
About Business Cycle Forecasts
Intensity Business Cycle Forecasts are produced daily by its leading-edge forecasting machine that combines systematic methodology, pioneering techniques, and high-dimensional computation that allows it to respond quickly to the most current economic conditions and events. Intensity’s scientific testing and validation methodologies ensure superior short and long-range out-of-sample forecast performance. The thought leaders behind Intensity’s forecasting machine include Dr. Ryan Sullivan, Dr. Allan Timmermann, and a seasoned team of economists, statisticians, computational engineers, software developers, and business experts.
For more information about our forecast subscription services, please visit www.intensity.com/forecasts.
About Dr. Ryan Sullivan
Ryan Sullivan, Ph.D. is Chief Executive Officer of Intensity and a leading expert in economics, finance, and statistics. He applies his expertise to solve the most complex and challenging issues that organizations face in the competitive marketplace and the courtroom. Dr. Sullivan engages projects across a spectrum of subject matters, including forecasting and predictive modeling. Dr. Sullivan was recognized as a top U.S. economic expert by Intellectual Asset Management in 2014, 2015, and 2016. He is an invited member of the Economics Leadership Council at the University of California, San Diego. Dr. Sullivan has provided professional economic services since 1992. He established Quant Economics in 2006 and Intensity in 2014.
About Dr. Allan Timmerman
Allan Timmermann, Ph.D. is an expert in financial markets, securities, economic forecasting, and statistics. Dr. Timmermann applies his expertise in data and econometric techniques to understand the behavior of prices and expectations in financial markets for managing risk, making portfolio decisions, and forecasting future price movements. Dr. Timmermann has developed innovative methods in areas such as forecasting under structural breaks, forecast combinations, and evaluation of predictive skills. Dr. Timmerman has consulted for a variety of international banks and investment institutions, including the European Central Bank (ECB), Board of the Federal Reserve, Bank of International Settlements (BIS, Basel) and the IMF.
About Intensity Corporation
Intensity is an economics and data science firm that generates brilliance through powerful research, analysis, and expertise to solve the most complex challenges in the marketplace and courtroom. We consistently deliver reliable results that are built upon meticulous research, intense scrutiny, and scientific analysis. For more information, please visit www.intensity.com.
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