Date of Award

6-2012

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

Second Department

Mathematics

First Advisor

Eshragh Motahar

Language

English

Keywords

economy, forecasting, yield curve spread, U.S.

Abstract

Being able to forecast recessions is a useful tool for policymakers and investors alike. Doing so is often a difficult task. Using data on the yield curve spread, the S&P 500, and monetary regimes, this paper investigates the merits of forecasting using the yield curve. This paper found that the yield curve has done a reliable job of forecasting recessions in the past. In addition, both the probit and continuous models used in this study are enhanced by the inclusion of a detrended version of the S&P 500 index and a dummy variable adjusting for the change from the Bretton Woods system to a fiat currency. Both models show low chances of the U.S entering a recession prior to December 2012.

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