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This paper studies linear and nonlinear autoregressive leading indicator models of business cycles in G-7 countries. Our models use the spread between short-term and long-term interest rates as leading indicators for GDP. We examine data admissibility by determining whether these models have the ability to produce time series with classical cycles that resemble the observed classical cycles in the data, and then we ask whether this data admissibility lends itself to better predictions of the probability of recession. Copyright © 2007 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

The article provides information concerning the economic developments in individual Organisation for Economic Co-Operation & Development (OECD) countries as well as selected non-member economies. In the U.S., healthy gains in private consumption have helped to keep gross domestic product (GDP) growth above trend in 2007. In Japan, the economic expansion continues despite some slowing in the pace of growth since early 2007. In Germany, after slowing in the second quarter, growth has picked up in the third quarter on the back of strong domestic demand.

This article discusses arguments on the role of increased oil prices in recessions, period of excessive inflation, reduced productivity and lower economic growth. There is a widespread belief that exogenous political events in the Middle East cause recessions in industrialized countries through their effect on the price of oil. This belief is fueled by the close statistical relationship between political events in the Middle East and recessions in the U.S. Even if we do not necessarily accept the view that exogenous political events in the Middle East cause recessions in the United States, it is undoubtedly true that many recessions since 1972 have been associated with major oil price increases, although again the association is less than perfect. Another way of undermining the benchmark result is to allow for capital-energy complementarities in production. In the presence of capital-energy complementarities, one would expect an oil price increase to lower real GDP by lowering the demand for capital services. Another potential channel of transmission is the transfer of wealth involved in paying higher oil import bills. The total wealth transfer from the industrialized countries to the oil-producing countries, however, will tend to be small, given the small expenditure on foreign oil relative to GDP.