The Yield Curve as a Leading Indicator: Some Practical Issues

8 Pages Posted: 20 Sep 2006

See all articles by Arturo Estrella

Arturo Estrella

Rensselaer Polytechnic Institute

Mary Trubin

Federal Reserve Bank of New York

Abstract

Since the 1980s, economists have argued that the slope of the yield curve - the spread between long- and short-term interest rates - is a good predictor of future economic activity. While much of the existing research has documented how consistently movements in the curve have signaled past recessions, considerably less attention has been paid to the use of the yield curve as a forecasting tool in real time. This analysis seeks to fill that gap by offering practical guidelines on how best to construct the yield curve indicator and to interpret the measure in real time.

Keywords: yield curve, recessions, real-time

JEL Classification: E43, E37, E52

Suggested Citation

Estrella, Arturo and Trubin, Mary, The Yield Curve as a Leading Indicator: Some Practical Issues. Available at SSRN: https://ssrn.com/abstract=931184

Arturo Estrella (Contact Author)

Rensselaer Polytechnic Institute ( email )

110 8th Street
Troy, NY 12180
United States

Mary Trubin

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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