Does the Yield Curve Predict Output?

Joseph G. Haubrich

No 20-34, Working Papers from Federal Reserve Bank of Cleveland

Abstract: Does the yield curve have the ability to predict output and recessions? At some times and in certain places, of course! But many details are matters of dispute: When and where does the yield curve predict successfully, which aspects of the curve matter most, and which economic forces account for the predictive ability? Over the years, an increasingly sophisticated set of tools, both statistical and theoretical, have addressed these issues. For the US, an inverted yield curve, particularly when the spread between the yield on 10-year and 3-month Treasuries becomes negative, has been a robust indicator of recessions in the post-World War Two period. The spread also predicts future real GDP growth for the US, although the forecast ability varies by time period, in ways that appear to depend on monetary policy. The evidence is less clear in other countries, but the yield curve shows some predictive ability for the UK and Germany, among others.

Keywords: Yield curve; term structures; prediction; recessions (search for similar items in EconPapers)
JEL-codes: E32 E43 G12 (search for similar items in EconPapers)
Pages: 37
Date: 2020-11-06
New Economics Papers: this item is included in nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.26509/frbc-wp-202034 Full Text (text/html)

Related works:
Journal Article: Does the Yield Curve Predict Output? (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:89008

Ordering information: This working paper can be ordered from

DOI: 10.26509/frbc-wp-202034

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().