Predicting Regional Recessions Via the Yield Spread

This paper examines the ability of the slope of the yield curve to serve as a predictor of regional recessions. The ability of interest rate spreads to predict recessions has received considerable attention at the aggregate level. This paper offers evidence on the usefulness of rate spreads in predicting economic downturns at the regional level. The evidence points to regional differences in the ability of the U.S. yield curve to predict regional recessions. These differences are highlighted in the context of differing regional economic structures.