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Is a recession imminent?

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  • John G. Fernald
  • Bharat Trehan

Abstract

The sharp slowdown in housing and the inverted yield curve have led to concerns that the odds of a recession have risen. For instance, Dow Jones Newswire reported on November 2 that one model based on the yield curve put the probability of a recession over the next four quarters at more than 50%. This Letter presents and discusses various estimates of the probability of recession. Our review of the evidence suggests two conclusions: First, recessions appear difficult to predict; second, while the probability of a recession over the next year may now be somewhat elevated, it does not appear to be nearly as high as the yield curve suggests.

Suggested Citation

  • John G. Fernald & Bharat Trehan, 2006. "Is a recession imminent?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue nov24.
  • Handle: RePEc:fip:fedfel:y:2006:i:nov24:n:2006-32
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    References listed on IDEAS

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    1. Michael Dueker, 2005. "Dynamic Forecasts of Qualitative Variables: A Qual VAR Model of U.S. Recessions," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 96-104, January.
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    Keywords

    Recessions ; Economic forecasting;

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