The Slope of the Term Structure and Recessions: The Pre-Fed Evidence, 1857-1913

Stefan Gerlach and Rebecca Stuart

No 13013, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the information content of the slope of the term structure for recessions, using monthly US data spanning 1857-1913. We find that the term spread predicts future recessions up to about 12 months ahead, as does the current value of the recession dummy. We also find that stock prices are significant in the probit models we use to predict future recessions, but that business failures and growth in industrial production are generally insignificant. Overall, the results give broad support to the findings of Bordo and Haubrich (2004, 2008a, 2008b), who use quarterly data from 1875 to study the ability of the term structure to forecast real GNP growth. C25

Keywords: Term structure; Recessions; Federal Reserve (search for similar items in EconPapers)
JEL-codes: C25 E00 E43 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-his and nep-mac
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Citations: View citations in EconPapers (10)

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