Economic Policy Uncertainty and Risk Indices: March 5, 2018
As uncertainty and risk indexes shoot up in the US will growth be impacted?
Economic Policy Uncertainty and Risk Indices: March 5, 2018
By: Menzie Chinn – University of Wisconsin–Madison
What is the flat US yield curve signalling?
Maybe an upcoming recession
Bauer and Mertens estimate the probability for an upcoming recession in the US to be 11{5e7f07e14add20b2e04f4edb85a447d3cd8121fc27b809645e9fed603c22cc5c} as of February 2018. This is a result confirmed by all four probit models they used and which incorporate either the term premium, the natural level of real interest rates, or a measure of asset market valuations, specifically the ratio of household net worth to income.
Economic Forecasts with the Yield Curve
By: Michael D. Bauer and Thomas M. Mertens – Federal Reserve Bank of San Francisco
…maybe not
Johansson and Meldrum argue that while taken by itself the flat yield curve suggests a higher probability of recession, incorporating information from corporate bond spreads and surveys of economists among other data points to a “much lower” probability of recession ahead.
Predicting Recession Probabilities Using the Slope of the Yield Curve
By: Peter Johansson and Andrew Meldrum – Federal Reserve Bank of New York, Federal Reserve Board
