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The continuing power of the yield spread in forecasting recessions

Dean Croushore () and Katherine Marsten
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Katherine Marsten: University of Richmond

No 14-5, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: 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)
New Economics Papers: this item is included in nep-dcm and nep-for
Date: 2014-02-13
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