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Do Foreign Yield Curves Predict U.S. Recessions and GDP Growth?

  • Paper
  • Dec, 2022
  • #Economics #EconomicGrowth
Rashad Ahmed
@RashadAhmed
(Author)
Menzie Chinn
@menzie_chinn
(Author)
www.nber.org
Read on www.nber.org
Read on papers.ssrn.com
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1 Mention
This paper shows that foreign term spreads constructed from bond yields of non-U.S. G-7 constituents predict future U.S. recessions and that foreign term spreads are stronger predic... Show More

This paper shows that foreign term spreads constructed from bond yields of non-U.S. G-7 constituents predict future U.S. recessions and that foreign term spreads are stronger predictors of U.S. recessions occurring within the next year than U.S. term spreads. U.S. and foreign term spreads are both informative of the U.S. economy but over different horizons and for different components of economic activity. Smaller U.S. term spreads lead to smaller foreign term spreads and U.S. Dollar appreciation. Smaller foreign term spreads do not lead to significant U.S. Dollar depreciation but do lead to persistent declines in U.S. exports and FDI flows into the United States. These findings are consistent with the proposition that foreign term spreads embed growth spillovers from the U.S. and the resulting Dollar strength and slowdown abroad spill back to the United States.

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David Cervantes @pinebrookcap ยท Apr 28, 2023
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Shout out to some great work done by @RashadA334 and @menzie_chinn Both excellent follows.
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