Journal Article
Economic Forecasts with the Yield Curve
Abstract: The term spread?the difference between long-term and short-term interest rates?is a strikingly accurate predictor of future economic activity. Every U.S. recession in the past 60 years was preceded by a negative term spread, that is, an inverted yield curve. Furthermore, a negative term spread was always followed by an economic slowdown and, except for one time, by a recession. While the current environment is somewhat special?with low interest rates and risk premiums?the power of the term spread to predict economic slowdowns appears intact.
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https://www.frbsf.org/economic-research/publications/economic-letter/2018/march/economic-forecasts-with-yield-curve/
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Bibliographic Information
Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2018
Order Number: 07