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Does the Yield Curve Signal Recessions? New Evidence from an International Panel Data Analysis
Abstract : In this paper, we reexamine the predictive power of the yield spread across countries and over time. Using a dynamic panel/dichotomous model framework and a unique dataset covering 13 OECD countries over a period of 45 years, we empirically show that the yield spread signals recessions. This result is robust to different econometric specifications, controlling for recession risk factors and time sampling. Using a new cluster analysis methodology, we present empirical evidence of a partial homogeneity of the predictive power of the yield spread. Our results provide a valuable framework for monitoring economic cycles.
Cited literature [65 references]
https://halshs.archives-ouvertes.fr/halshs-02549044
Contributor : Elisabeth Lhuillier <>
Submitted on : Tuesday, April 21, 2020 - 10:46:58 AM
Last modification on : Saturday, October 3, 2020 - 3:28:29 AM
Contributor : Elisabeth Lhuillier <>
Submitted on : Tuesday, April 21, 2020 - 10:46:58 AM
Last modification on : Saturday, October 3, 2020 - 3:28:29 AM
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WP 2020 - Nr 13.pdf
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