Predicting recessions with interest rate spreads: A multicountry regime-switching analysis

Arbeitspapier

This study uses Markov-switching models to evaluate the informational content of the term structure as a predictor of recessions in eight OECD countries. The empirical results suggest that for all countries the term spread is sensibly modelled as a two-state regime-switching process. Moreover, our simple univariate model turns out to be a filter that transforms accurately term spread changes into turning point predictions. The term structure is confirmed to be a reliable recession indicator. However, the results of probit estimations show that the markov-switching filter does not significantly improve the forecasting ability of the spread. Klassifikation:

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper ; No. 1999/15

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Forecasting Models; Simulation Methods
• Subject: term structure ; economic fluctuations ; forecasting ; regime-switching

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ahrens, Ralf
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/78089
• URN: urn:nbn:de:hebis:30-9643
• Last update: 10.03.2025, 11:42 AM CET