The aim of the present work is to test the predictive power of the term spread in forecasting real economic growth rates and recession probabilities in Italy. According to the most recent literature, the relationship between the term spread and economic growth rates is modelled as a nonlinear one and specifically the Logistic Smooth Transition model is used, while a probit model is implemented to forecast recession probabilities. In both applications evidence supports a relevant informative content of the spread in Italy

Costanza Torricelli and Marianna Brunetti

Department of Economics from University of Modena and Reggio E., Faculty of Economics "Marco Biagi"

Keywords: term structure; term spread; regime prediction (search for similar items in EconPapers)
JEL-codes: C53 E32 E43 (search for similar items in EconPapers)
Pages: pages 25
Date: 2005-12
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Published in Applied Economics (2009)

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