Why does the short-term slope of the yield curve predict recessions? We explore the economic forces underlying Treasury yields' fluctuations and highlight the roles of a tight monetary policy stance and expectations of lower inflation in predicting downturns. While the monetary policy stance is...

Why does the short-term slope of the yield curve predict recessions? We explore the economic forces underlying Treasury yields' fluctuations and highlight the roles of a tight monetary policy stance and expectations of lower inflation in predicting downturns. While the monetary policy stance is...

Why is an inverted yield-curve slope such a powerful predictor of future recessions? We show that a decomposition of the yield curve slope into its expectations and risk premia components helps disentangle the channels that connect fluctuations in Treasury rates and the future state of the...

Why is an inverted yield-curve slope such a powerful predictor of future recessions? We show that a decomposition of the yield curve slope into its expectations and risk premia components helps disentangle the channels that connect fluctuations in Treasury rates and the future state of the...

In this paper, we replicate the main results of Rudebusch and Williams (2009), who show that the use of the yield spread in a probit model can predict recessions better than the Survey of Professional Forecasters. We investigate the robustness of their results in several ways: extending the...

We combine the probability forecasts of a real GDP decline from the US Survey of Professional Forecasters, after trimming the forecasts that do not have “value”, as measured by the Kuiper Skill Score and in the sense of Merton (1981). For this purpose, we use a simple test to evaluate the...

In this article, we focus on the ability of two financial variables—the yield curve spread and the euro–US dollar exchange rate—to predict French recessions over the period 1979–2010. First, we propose a turning point chronology for the French business cycle based on a classical...