The continuing power of the yield spread in forecasting recessions
Dean Croushore () and
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Katherine Marsten: University of Richmond
No 14-5, Working Papers from Federal Reserve Bank of Philadelphia
In this paper, we replicate the main results of Rudebusch and Williams (2009), who show that the use of the yield spread in a probit model can predict recessions better than the Survey of Professional Forecasters. We investigate the robustness of their results in several ways: extending the sample to include the 2007-09 recession, changing the starting date of the sample, changing the ending date of the sample, using rolling windows of data instead of just an expanding sample, and using alternative measures of the \actual" value of real output. Our results show that the Rudebusch-Williams findings are robust in all dimensions.
Keywords: Real-time data; Recession forecasts; Yield spread (search for similar items in EconPapers)
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