Does the yield curve signal recessions? New evidence from an international panel data analysis

Jean-Baptiste Hasse and Quentin Lajaunie
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Quentin Lajaunie: LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours

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Abstract: In this paper, we reexamine the predictive power of the yield spread across countries and over time. Using a dynamic panel/dichotomous model framework and a unique dataset covering 13 OECD countries over the period 1975–2019, we empirically show that the yield spread signals recessions. This result is robust to different econometric specifications, controlling for recession risk factors and time sampling. Using a new cluster analysis methodology, we present empirical evidence of a partial homogeneity of the predictive power of the yield spread. Our results provide a valuable framework for monitoring economic cycles.

Keywords: Yield; spread; Recession; Panel; binary; model; Cluster; analysis (search for similar items in EconPapers)
Date: 2022-05
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-03740235
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Published in Quarterly Review of Economics and Finance, 2022, 84, pp.9-22. ⟨10.1016/j.qref.2022.01.001⟩

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Journal Article: Does the yield curve signal recessions? New evidence from an international panel data analysis (2022)
Working Paper: Does the yield curve signal recessions? New evidence from an international panel data analysis (2022)
Working Paper: Does the Yield Curve Signal Recessions? New Evidence from an International Panel Data Analysis (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03740235

DOI: 10.1016/j.qref.2022.01.001

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