Economic Forecasts with the Yield Curve

Michael Bauer and Thomas Mertens

FRBSF Economic Letter, 2018

Abstract: The term spread?the difference between long-term and short-term interest rates?is a strikingly accurate predictor of future economic activity. Every U.S. recession in the past 60 years was preceded by a negative term spread, that is, an inverted yield curve. Furthermore, a negative term spread was always followed by an economic slowdown and, except for one time, by a recession. While the current environment is somewhat special?with low interest rates and risk premiums?the power of the term spread to predict economic slowdowns appears intact.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (36)

Downloads: (external link)
https://www.frbsf.org/economic-research/publicatio ... ts-with-yield-curve/ Full text (application/pdf)

Related works:
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:fedfel:00158

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in FRBSF Economic Letter from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().