Predicting severe simultaneous recessions using yield spreads as leading indicators
AbstractSevere simultaneous recessions are defined to occur when at least half of the countries under investigation (Australia, Canada, Germany, Japan, United Kingdom, and United States) are in recession simultaneously. I pose two new research questions that extend upon stylized facts for US recessions. One, are the occurrences of simultaneous recessions predictable? Two, does the yield spread predict future occurrences of simultaneous recessions? I use the indicator for severe simultaneous recessions as the explained variable in probit models. The lagged yield spread is an important explanatory variable, where decreasing yield spreads are a leading indicator for severe simultaneous recessions. Both US and German yield spreads act as leading indicator for severe simultaneous recessions.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 32 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/30443
Business cycle; Recessions; Yield spread; Probit model;
Other versions of this item:
- Charlotte Christiansen, 2011. "Predicting Severe Simultaneous Recessions Using Yield Spreads as Leading Indicators," CREATES Research Papers 2011-20, School of Economics and Management, University of Aarhus.
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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- Candelon, Bertrand & Metiu, Norbert & Straetmans, Stefan, 2013. "Disentangling economic recessions and depressions," Discussion Papers 43/2013, Deutsche Bundesbank, Research Centre.
- John C Bluedorn & JÃ¶rg Decressin & Marco Terrones, 2013. "Do Asset Price Drops Foreshadow Recessions?," IMF Working Papers 13/203, International Monetary Fund.
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