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Journal Articles Quarterly Review of Economics and Finance Year : 2022

Does the yield curve signal recessions? New evidence from an international panel data analysis

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Abstract

In this paper, we reexamine the predictive power of the yield spread across countries and over time. Using a dynamic panel/dichotomous model framework and a unique dataset covering 13 OECD countries over the period 1975–2019, we empirically show that the yield spread signals recessions. This result is robust to different econometric specifications, controlling for recession risk factors and time sampling. Using a new cluster analysis methodology, we present empirical evidence of a partial homogeneity of the predictive power of the yield spread. Our results provide a valuable framework for monitoring economic cycles.

Dates and versions

hal-03740235 , version 1 (29-07-2022)

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Jean-Baptiste Hasse, Quentin Lajaunie. Does the yield curve signal recessions? New evidence from an international panel data analysis. Quarterly Review of Economics and Finance, 2022, 84, pp.9-22. ⟨10.1016/j.qref.2022.01.001⟩. ⟨hal-03740235⟩
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