Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/328114 
Authors: 
Year of Publication: 
2021
Citation: 
[Journal:] Review of Economic Analysis (REA) [ISSN:] 1973-3909 [Volume:] 13 [Issue:] 4 [Year:] 2021 [Pages:] 427-457
Publisher: 
International Centre for Economic Analysis (ICEA), Waterloo (Ontario)
Abstract: 
This paper adopts a novel approach to studying the evolution of interest rate term structure over the U.S. business cycles and to predicting recessions. Applying an effective algorithm, I classify the Treasury yield curve into distinct shapes and find the less frequent shapes intrinsically linked to the recessions in the post-WWII data. In forecasting recessions, the median-short yield spread trumps the long-short spread for horizons up to 17 months ahead and the yield curve shape is nearly impressive as the median-short spread. Overall, the yield curve shape is an informative but more succinct indicator than the spreads in studying the term structure. Key words: Business cycle, recession forecast, U.S. Treasury yield curve, yield spreads.
Subjects: 
Business cycle
recession forecast
U.S. Treasury yield curve
yield spreads
JEL: 
E32
E43
E47
G12
C52
C53
C82
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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