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Does the yield curve signal recession?


  • Joseph G. Haubrich


Experience has taught economic forecasters to expect a recession when the yield on short-term Treasury securities rises above the yield on longer-term securities—a situation known as a yield-curve inversion. But some economists suspect the yield curve might not be as reliable a predictor of output growth as it used to be.

Suggested Citation

  • Joseph G. Haubrich, 2006. "Does the yield curve signal recession?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Apr.
  • Handle: RePEc:fip:fedcec:y:2006:i:apr15

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    References listed on IDEAS

    1. Ben S. Bernanke & Mark Gertler & Mark Watson, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91-157.
    2. Sharon Kozicki, 1999. "How useful are Taylor rules for monetary policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-33.
    3. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October.
    4. Sims, Christopher A. & Zha, Tao, 2006. "Does Monetary Policy Generate Recessions?," Macroeconomic Dynamics, Cambridge University Press, vol. 10(02), pages 231-272, April.
    5. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    6. Hamilton, James D & Herrera, Ana Maria, 2004. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 265-286, April.
    7. Bernanke, Ben S & Gertler, Mark & Watson, Mark W, 2004. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Reply," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 287-291, April.
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    Cited by:

    1. Mikhail V. Oet & John M. Dooley & Stephen J. Ong, 2015. "The Financial Stress Index: Identification of Systemic Risk Conditions," Risks, MDPI, Open Access Journal, vol. 3(3), pages 1-25, September.
    2. De Santis, Roberto A., 2012. "Quantity theory is alive: the role of international portfolio shifts," Working Paper Series 1435, European Central Bank.
    3. Rudebusch, Glenn D. & Williams, John C., 2009. "Forecasting Recessions: The Puzzle of the Enduring Power of the Yield Curve," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 492-503.


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