NBER

This model uses the monthly average term spread between 10-year and 3-month Treasury rates to estimate the probability that a US recession will start anywhere from one to 12 months into the future. The model is estimated here using data for the monthly NBER recession indicator from January 1968 to twelve months prior to the end of the data sample. The final year of available data is held back in recognition of the long lags in the identification of business cycle turning points by the NBER. See Discussion Paper No. 2301 for details of the model. The following graph shows the historical performance of the new model... Like the original model, the probability model presented in this section uses monthly observations of the 10-year minus 3-month Treasury yield spread to forecast recessions. However, the new model is optimized to make better use of the special characteristics of the recession and term spread data series and it is calibrated so as to make the results more easily..

Primary location: New York United States