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Federal Reserve Bank of Philadelphia
Working Papers
The continuing power of the yield spread in forecasting recessions
Dean Croushore
Katherine Marsten
Abstract

In this paper, we replicate the main results of Rudebusch and Williams (2009), who show that the use of the yield spread in a probit model can predict recessions better than the Survey of Professional Forecasters. We investigate the robustness of their results in several ways: extending the sample to include the 2007-09 recession, changing the starting date of the sample, changing the ending date of the sample, using rolling windows of data instead of just an expanding sample, and using alternative measures of the \actual" value of real output. Our results show that the Rudebusch-Williams findings are robust in all dimensions.


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Dean Croushore & Katherine Marsten, The continuing power of the yield spread in forecasting recessions, Federal Reserve Bank of Philadelphia, Working Papers 14-5, 13 Feb 2014.
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Keywords: Real-time data; Recession forecasts; Yield spread
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