Predicting Severe Simultaneous Recessions Using Yield Spreads as Leading Indicators
AbstractSevere simultaneous recessions are de?ned 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.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2011-20.
Date of creation: 31 May 2011
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Web page: http://www.econ.au.dk/afn/
Business cycle; Recessions; Yield spread; Probit model;
Other versions of this item:
- Christiansen, Charlotte, 2013. "Predicting severe simultaneous recessions using yield spreads as leading indicators," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 1032-1043.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-11 (All new papers)
- NEP-CBA-2011-06-11 (Central Banking)
- NEP-FOR-2011-06-11 (Forecasting)
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