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7 wrz 2023 · A statistical model called a “probit” translates the level of the spread into a formal probability of recession. The spread does predict recessions well, in the sense that implied recession probabilities rise before each recession.
We forecast recession probabilities for the United States, Germany and Japan. The predictions are based on the widely-used probit approach, but the dynamics of regressors are endogenized using a VAR.
For example, if we want to predict recessions at the one-year horizon, the dependent variable takes the value 1 if there is a recession within the next year, and zero otherwise. The probit regression then estimates the probability that a recession will occur within the next year, conditional on the current indicator values.
3 lut 2020 · The results show that a yield curve inversion likely overstates the probability of a recession when the stance of monetary policy, judged relative to a time-varying neutral federal funds rate, is accommodative.
21 cze 2022 · As a result, economists and financial market professionals have considered prediction models to assess the probability of a recession. A range of approaches have been considered. One strand of analysis uses financial market variables—often the slope of the yield curve—to assess recession risk.
1 mar 2018 · We find that a model relating the probability of a recession at some point within a year to the slope of the yield curve implies that the probability of a recession has indeed risen as the yield curve has become flatter over recent years.
An example is the probit analysis in figure 2, which shows the fitted probability that a recession will occur over the next year when the explanatory variable is the ten-to-two-year yield-curve spread.
