Stefan Gerlach and Rebecca Stuart: The Term Structure and Recessions Before the Fed: "The results... (1) A flattening of the term spread increases the risk of recession...
...(2) Whether the economy is currently in a recession or not is useful.... For forecast horizons of less than 13 months, being in recession now raises the likelihood of being in recession in the future. For forecast horizons of 13 months or more, being in recession now reduces the likelihood that the economy will in recession in the future. (3) Including the short interest rate as a regressor in addition to the term spread does not improve forecasting performance. (4) The forecasting performance is highest at a forecast horizon of one month.... (5) The slope of the term structure does not embody all available information about the likelihood of a recession.... Overall, the analysis suggests... the term structure['s]... information content does not arise solely as a consequence of countercyclical monetary policy.... The results fully support the findings in Bordo and Haubrich (2004, 2008a and 2008b) for the pre-Fed period...
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