Predicting severe simultaneous recessions using yield spreads as leading indicators

Charlotte Christiansen

Journal of International Money and Finance, 2013, vol. 32, issue C, 1032-1043

Abstract: Severe simultaneous recessions are defined to occur when at least half of the countries under investigation (Australia, Canada, Germany, Japan, United Kingdom, and United States) are in recession simultaneously. I pose two new research questions that extend upon stylized facts for US recessions. One, are the occurrences of simultaneous recessions predictable? Two, does the yield spread predict future occurrences of simultaneous recessions? I use the indicator for severe simultaneous recessions as the explained variable in probit models. The lagged yield spread is an important explanatory variable, where decreasing yield spreads are a leading indicator for severe simultaneous recessions. Both US and German yield spreads act as leading indicator for severe simultaneous recessions.

Keywords: Business cycle; Recessions; Yield spread; Probit model (search for similar items in EconPapers)
JEL-codes: C25 E32 E43 F44 G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Predicting Severe Simultaneous Recessions Using Yield Spreads as Leading Indicators (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:32:y:2013:i:c:p:1032-1043

DOI: 10.1016/j.jimonfin.2012.08.005

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