Download or read book The Yield Curve s Predictive Power on U S Recessions written by John William Lahman and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A negative-sloped Treasury curve is often cited in financial news articles and by Federal Reserve economists as a predictor of recessions. This report reviews previously published research examining the reliability of yield curves predicting recessions. Findings show that the yield curve inverts two or more quarters before recessions, with short-term interest rates rising above long-term interest rates. Probit regression has proven a reliable method for generating estimated probabilities of future recessions that, in turn, are useful for both monetary policy and asset allocation decision-making.
Download or read book The Predictive Power of Yield Curve in Forecasting U S Recessions written by Hardeep Bamara and published by . This book was released on 2006 with total page 118 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the last recession in 2001, the U.S. economy has continued to grow; yet speculation of a recession has surfaced on the basis of the yield curve flattening. Yield curve inversion has been strongly associated with U.S. recessions over the last forty-six years. This paper examines the predictive power of the yield curve, the index of leading indicators, monetary growth and stock returns in forecasting U.S. recessions. A probit model is used to generate recession probability forecasts three, six, nine and twelve months forward. Empirical results show that the yield curve embodies the highest degree of explanatory power beyond a three-month forecast horizon. Results for the last two recessions are analyzed as well as forecasts going forward into 2006. As a final observation, an asset allocation trading strategy is tested out-of-sample.
Download or read book The Cyclical Behavior of the Term Structure of Interest Rates written by Reuben A. Kessel and published by . This book was released on 1965 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Current Issues in Economics and Finance written by Bandi Kamaiah and published by Springer. This book was released on 2018-01-12 with total page 227 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book discusses wide topics related to current issues in economic growth and development, international trade, macroeconomic and financial stability, inflation, monetary policy, banking, productivity, agriculture and food security. It is a collection of seventeen research papers selected based on their quality in terms of contemporary topic, newness in the methodology, and themes. All selected papers have followed an empirical approach to address research issues, and are segregated in five parts. Part one covers papers related to fiscal and price stability, monetary policy and economic growth. The second part contains works related to financial integration, capital market volatility and macroeconomic stability. Third part deals with issues related to international trade and economic growth. Part four covers topics related to productivity and firm performance. The final part discusses issues related to agriculture and food security. The book would be of interest to researchers, academicians as a ready reference on current issues in economics and finance.
Download or read book How Stable is the Predictive Power of the Yield Curve written by Arturo Estrella and published by . This book was released on 2000 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book How Stable is the Predictive Power of the Yield Curve Evidence from Germany and the United States written by Arturo Estrella and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical research over the last decade has uncovered predictive relationships between the slope of the yield curve and subsequent real activity and inflation. Some of these relationships are highly significant, but their theoretical motivations suggest that they may not be stable over time. We use recent econometric techniques for break testing to examine whether the empirical relationships are in fact stable. We consider continuous models, which predict either economic growth or inflation, and binary models, which predict either recessions or inflationary pressure. In each case, we draw on evidence from Germany and the United States. Models that predict real activity are more stable than those that predict inflation, and binary models are more stable than continuous models. The model that predicts recessions is stable over our full sample period in both Germany and the United States.
Download or read book Strengthening the Case for the Yield Curve as a Predictor of United States Recessions written by and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Cf.: http://dx.doi.org/10.3886/ICPSR01173.v1.
Download or read book The Yield Curve As A Forecasting Tool written by Melvin Khomo and published by LAP Lambert Academic Publishing. This book was released on 2010-04 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the ability of the yield curve to predict recessions in South Africa, and compares its predictive power with other commonly used variables that include the growth rate in real money supply, changes in stock prices and the index of leading economic indicators. The study also makes an attempt to find out if monetary policy explains the yield spread s predictive power with regards to future economic activity. Regarding methodology, the standard probit model proposed by Estrella and Mishkin (1996) that directly estimates the probability of the economy going into recession is used. Results from this model are compared with a modified probit model suggested by Dueker (1997) that includes a lagged dependent variable. Results presented in the paper provide further evidence that the yield curve, as represented by the yield spread between 3-month and 10-year government paper, can be used to estimate the likelihood of recessions in South Africa. The yield spread can produce recession forecasts up to 18 months, although it s best predictive power is seen at two quarters.
Download or read book Financial Forecasting for Business and Economics written by Eduard Jan Bomhoff and published by . This book was released on 1994 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: This text summarizes the important new thinking on financial market forecasting and on the statistical modeling of non-stationary series in a clear and readable manner. The emphasis throughout is on real-life examples using data from a wide variety of countries and sources.
Download or read book Alternative Economic Indicators written by C. James Hueng and published by W.E. Upjohn Institute. This book was released on 2020-09-08 with total page 133 pages. Available in PDF, EPUB and Kindle. Book excerpt: Policymakers and business practitioners are eager to gain access to reliable information on the state of the economy for timely decision making. More so now than ever. Traditional economic indicators have been criticized for delayed reporting, out-of-date methodology, and neglecting some aspects of the economy. Recent advances in economic theory, econometrics, and information technology have fueled research in building broader, more accurate, and higher-frequency economic indicators. This volume contains contributions from a group of prominent economists who address alternative economic indicators, including indicators in the financial market, indicators for business cycles, and indicators of economic uncertainty.
Download or read book Analyzing the Effectiveness of the U S Yield Curve as a Leading Economic Indicator written by Aditya Kalgutkar and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis aims to contribute to the growing body of literature investigating the United States yield curves predictive power of recessions. First, I discuss yield curve theory, explaining the structure of the yield curve and linking it to forward-looking interest rate expectations. I follow with a discussion of monetary policy, transmission lag, and potential pollutants of the yield curves signal to establish the importance of the slope of the yield curve and to highlight the need for its evaluation as a reliable economic indicator. I then conduct a literature review covering the various techniques and approaches used in this field over the past few decades. Drawing from previous conclusions, I create a framework for study largely based on the probit model. I look at a full sample, a pre-1995 sample, and a post-1995 sample and analyze R2 and log-likelihood values to assess the fits of various probit models. I conclude my analysis using vector autoregression (VAR) to measure the response between percent change in GDP and the slope of the yield curve.From my analysis, I conclude that the yield curve still holds its standing as an effective forward-looking indicator, especially when used in conjunction with other explanatory variables in probit models. The yield curve is fundamentally tied to the markets expectations for future interest rates, which are determined by monetary policy. As long as central banks maintain credibility and markets continue to regard forward guidance, the yield curve should continue to be reliable.
Download or read book The Yield Curve as a Predictor of U S Recessions written by Frederic S. Mishkin and published by . This book was released on 2000 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: The yield curve?specifically, the spread between the interest rates on the ten-year Treasury note and the three-month Treasury bill?is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead.
Download or read book The Predictive Power of the Yield Curve written by Hüseyin Kaya and published by LAP Lambert Academic Publishing. This book was released on 2011-08 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: The yield curve has long been a subject of interest to macroeconomists and financial economists since the term structure of interest rates carries important information about expectations, monetary policy and market risk factors. As expectation hypothesis suggest; it is possible to extract expectations of economic actors about future economic activity by torturing the term structure of interest rates. Recent economic and financial crisis has manifested the importance of the indicators that correctly predict the future path of economy, and hence has increased the value of studies on the yield curve. In this study, we provide a literature survey of predictive power of the yield curve on inflation and reel economic activity and, of policy effects on the predictive power of the yield curve. We also investigate whether the yield spreads and reel economic activity has long-run relationship in Turkey. Economists, policymakers and market analyst who wish to investigate whether the term structure of interest rates contains significant information about the future economic activity can utilize this study.
Download or read book The Yield Curve as a Predictor of U S Recessions written by Arturo Estrella and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The yield curveőspecifically, the spread between the interest rates on the ten-year Treasury note and the three-month Treasury billőis a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead.
Download or read book Recession Signals written by Kevin L. Kliesen and published by . This book was released on 2019 with total page 3 pages. Available in PDF, EPUB and Kindle. Book excerpt: In early May 2018, The Wall Street Journal asked professional forecasters to predict when the next recession would begin. Nearly 6 in 10 answered that the next recession will begin sometime in 2020. If so, the current business expansion will have eclipsed the 1991-2001 expansion as the longest on record. Economists and policymakers look at several leading indicators when attempting to predict a slowdown or outright contraction in economic activity. Two stand out: the slope of the yield curve and the direction of the unemployment rate. The purpose of this essay is to ascertain the predictive power of these two economic indicators.
Download or read book Leading Economic Indicators written by Kajal Lahiri and published by Cambridge University Press. This book was released on 1991 with total page 488 pages. Available in PDF, EPUB and Kindle. Book excerpt: Developed fifty years ago by the National Bureau of Economic Research, the analytic methods of business cycles and economic indicators enable economists to forecast economic trends by examining the repetitive sequences that occur in business cycles. The methodology has proven to be an inexpensive and useful tool that is now used extensively throughout the world. In recent years, however, significant new developments have emerged in the field of business cycles and economic indicators. This volume contains twenty-two articles by international experts who are working with new and innovative approaches to indicator research. They cover advances in three broad areas of research: the use of new developments in economic theory and time-series analysis to rationalise existing systems of indicators; more appropriate methods to evaluate the forecasting records of leading indicators, particularly of turning point probability; and the development of new indicators.
Download or read book Enabling Deep Negative Rates to Fight Recessions A Guide written by Ruchir Agarwal and published by International Monetary Fund. This book was released on 2019-04-29 with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt: The experience of the Great Recession and its aftermath revealed that a lower bound on interest rates can be a serious obstacle for fighting recessions. However, the zero lower bound is not a law of nature; it is a policy choice. The central message of this paper is that with readily available tools a central bank can enable deep negative rates whenever needed—thus maintaining the power of monetary policy in the future to end recessions within a short time. This paper demonstrates that a subset of these tools can have a big effect in enabling deep negative rates with administratively small actions on the part of the central bank. To that end, we (i) survey approaches to enable deep negative rates discussed in the literature and present new approaches; (ii) establish how a subset of these approaches allows enabling negative rates while remaining at a minimum distance from the current paper currency policy and minimizing the political costs; (iii) discuss why standard transmission mechanisms from interest rates to aggregate demand are likely to remain unchanged in deep negative rate territory; and (iv) present communication tools that central banks can use both now and in the event to facilitate broader political acceptance of negative interest rate policy at the onset of the next serious recession.
