Does the Yield Spread Predict Recessions in the Euro Area?*

Fabio Moneta

129 citations0/0 files storedInternational Finance

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Monetary Policy and Economic Impact Global Financial Crisis and Policies Forecasting Techniques and Applications

Abstract

This paper studies the informational content of the slope of the yield curve as a predictor of recessions in the euro area and provides evidence of the potential usefulness of this indicator for monetary policy purposes. In particular, the historical predictive power of ten variations of yield spreads, for different segments of the yield curve, is tested using a probit model. The yield spread between the ten-year government bond rate and the three-month interbank rate outperforms all other spreads in predicting recessions in the euro area. The forecast accuracy of the spread between ten-year and three-month interest rates is also explored in an exercise of out-of-sample forecasting. This yield spread appears to contain information beyond that already available in the history of output, and to outperform other competitor indicators.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 129 citations exist upstream.

References

1989A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle 1994Comparing Predictive Accuracy 1995Comparing Predictive Accuracy 1997Testing the equality of prediction mean squared errors 1991The Term Structure as a Predictor of Real Economic Activity 2006Tests of Conditional Predictive Ability 1998Predicting U.S. Recessions: Financial Variables as Leading Indicators 2003Forecasting Output and Inflation: The Role of Asset Prices

Cited by

2014Forecasting US recessions: The role of sentiment 2009The duration of economic expansions and recessions: More than duration dependence 2005Capital requirements and business cycle regimes: Forward-looking modelling of default probabilities 2009The Role of Financial Variables in Predicting Economic Activity 2015The Predictive Power of the Yield Curve Across Countries and Time 2010The Predictive Power of the Yield Curve across Countries and Time

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.