Spread's predictive ability is reviewed by implementing a number of linear and probit models. We conduct a comparative analysis of the forecasting performance of various specifications by focusing on the last three major US economic slowdowns. The results indicate that although linear models are...

Various studies model the dynamics of the yield curve assuming that some of the yields are measured without error but this methodology lacks economic interpretation. We overcome this problem by estimating a modified affine model with macroeconomic and latent factors which introduces measurement...