Strengthening the Case for the Yield Curve as a Predictor of U.S. Recessions

Yield spread as a leading indicator of Tunisian industrial production

“…This forecast is done estimating a probit model. Dueker (1997) confirms this result using a modified probit model which includes a lagged dependent variable. Built on these works, many papers, on the one hand, give empirical results on the fact that these evidences are present also in the major countries of the European Union and, on the other hand, they try to improve or change the model used to forecast recessions.…”

“…In this case, Plosser and Rouwenhorst (1994) pointed out that one would expect the nominal term structure to forecast real activity better if the term structure of expected inflation is flat and stable over time rather than sloped and variable. 5 But as Dueker (1997) explains, this is depends on their assessment of the size and duration of the recession's effect on short-term interest rates.…”

“…First, we estimate a probit model to obtain a probability of recession in the Tunisian economy between 1 and 7 months ahead. Then, we improve the probit model using the modification proposed by Dueker (1997). In order to analyse the predictive informative content in different segments of the yield curve we use five yield curve spreads as explanatory variables.…”

“…Here, since the shocks are unobservable this technique is not more available. Therefore, we adopt the solution proposed by Dueker (1997) Table 2 presents the results of the estimations of this model using respectively as explanatory variable the spread S1, S2, S3 and SF and with lags ranging from one to six . The pseudo-R2 is now calculated in the same manner as explained above with the exception that we can have three different specifications.…”

Composite Leading Indicators for Ukraine: An Early Warning Model

“…Most recent econometric works used dynamic probit models (Duecker, 1997;Valcks et al, 2002;Moneta, 2003;Chauvet and Potter, 2005;Kauppi and Saikkonen, 2007;and Nyberg, 2008). The key difference between a dynamic and a static probit model is that the former includes, among other indicators, lagged values of the dependent variable as an explanatory variable (and potentially a leading 37 indicator).…”