Date of Award
Bachelor of Arts
economy, forecasting, yield curve spread, U.S.
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.
Casper, Michael, "The Yield Curve: An Analysis of its Forecasts for the Future of the U.S Economy" (2012). Honors Theses. 786.