Results 1 - 30 of 37 for yield curve has inverted signaling
Should We Fear the Inverted Yield Curve? - Page One Economics®
The yield curve inverted before every one of the last nine U.S. recessions. How do U.S. government bonds shape the yield curve, why does it invert, and is it really a warning signal? Find out in the December 2019 issue of Page One Economics®.
research.stlouisfed.org/.../page1-econ/2019/11/29/should-we-fear-the-inverted-yield-curve
Strengthening the Case for the Yield Curve as a Predictor of U.S. Recessions - Review
Past experience has led financial market participants to believe that future interest rates will be closely related to the performance of the economy. If so, the shape of the yield curve ought to summarize the implicit economic forecasts of a broad range of bond traders.
Predicting the Yield Curve Inversions that Predict Recessions: Part 1 - Economic Synopses
Current macroeconomic indicators generally decrease before recessions, but not before yield curve inversions.
research.stlouisfed.org/.../predicting-the-yield-curve-inversions-that-predict-recessions-part-1
A Comparison of Fed "Tightening" Episodes since the 1980s - Working Paper 2020-003
This article examines how the real economy and inflation and inflation expectations evolved in response to the six tightening episodes enacted by the FOMC since 1983. The findings indicate that the sixth episode (2015-2018) differed in several key dimensions compared with the previous five episodes. In the first five episodes, the data show the FOMC was generally tightening into a strengthening economy with building price pressures. In contrast, in the final episode the FOMC began its tightening regime during a deceleration in economic activity and with headline and core inflation remaining well below the FOMC’s 2 percent inflation target. Moreover, both short- and long-term inflation expectations were drifting lower. These developments helped explain why there was a one-year gap between the first and second increases in the federal funds target rate in the final episode. Another key difference is that in three of the first five episodes, the FOMC continued to tighten after the yield curve inverted; a recession then followed shortly thereafter. However, in the final episode, the FOMC ended its tightening policy about eight months before the yield curve inverted.
A Comparison of Fed "Tightening" Episodes since the 1980s - Working Paper 2020-003
Deciding to undertake a series of tightening actions present unique challenges for Federal Reserve policymakers. These challenges are both political and economic. Using a variety of economic and financial market metrics, this article examines how the economy and financial markets evolved in response to the five tightening episodes enacted by the FOMC since 1983. The primary aim is to compare the most-recent episode, from December 2015 to December 2018, with the previous four episodes. The findings in this article indicate that the current episode bears some resemblance to previous Fed tightening episodes, but also differs in several key dimensions. For example, in the first four episodes, the data show the FOMC was generally tightening into a strengthening economy with building price pressures. In contrast, in the fifth episode the FOMC began its tightening regime during a deceleration in economic activity and with headline and core inflation remaining well below the FOMC’s 2 percent inflation target. Moreover, both short- and long-term inflation expectations were drifting lower. These developments helped explain why there was a one-year gap between the first and second increases in the federal funds target rate in the most-recent episode. Another key difference is that in three of the first four episodes, the FOMC continued to tighten after the yield curve inverted; a recession then followed shortly thereafter. However, in the final episode, the FOMC ended its tightening policy about eight months before the yield curve inverted. It remains to be seen if a recession follows this inversion.
Measuring Financial and Economic Risk with FRED® - Page One Economics®
FRED® (Federal Reserve Economic Data) provides access to a wide range of time-series data. Several of those series signal stress levels in financial markets and the probability of economic recession. This Special Edition of Page One Economics® describes indexes of financial and economic recession risk for new data users and can serve as a reference for advanced data users.
research.stlouisfed.org/.../page1-econ/2020/09/15/measuring-financial-and-economic-risk-with-fred
Can the Term Spread Predict Output Growth and Recessions? A Survey of the Literature - Review
This article surveys recent research on the usefulness of the term spread (i.e., the difference between the yields on long-term and short-term Treasury securities) for predicting changes in economic activity.
Do Bank Loan Rates Exhibit a Countercyclical Mark-up? - Working Paper 1997-004
Based on a switching-cost model, we examine empirically the hypotheses that bank loan mark-ups are countercycical and asymmetric in their responsiveness to recessionaly and expansionary impulses. The first econometric model treats changes in the mark-up as a continuous variable. The second treats them as an ordered categorical variable due to the discrete nature of prime rate changes. By allowing the variance to switch over time as a Markov process, we present the first conditionally heteroscedastic discrete choice (ordered probit) model for time-series applications. This feature yields a remarkable improvement in the likelihood function. Specifications that do not account for conditional heteroscedasticity find evidence of both countercyclical and asymmetric mark-up behavior. Incontrast, the heteroscedastic ordered probit finds the mark-up to be countercycical but not significantly asymmetric. We explain why controlling for conditional heteroscedasticity may be important when testing for downward stickiness in loan rates.
Unconventional monetary policy had large international effects - Working Paper 2010-018
The Federal Reserve’s unconventional monetary policy announcements in 2008-2009 substantially reduced international long-term bond yields and the spot value of the dollar. These changes closely followed announcements and were very unlikely to have occurred by chance. A simple portfolio choice model can produce quantitatively plausible changes in U.S. and foreign excess bond yields. The jump depreciations of the USD are fairly consistent with estimates of the impacts of previous equivalent monetary policy shocks. The policy announcements do not appear to have reduced yields by reducing expectations of real growth. Unconventional policy can reduce international long-term yields and the value of the dollar even at the zero bound.
This article was prepared for the Homer Jones Lecture, Federal Reserve Bank of St. Louis, March 28, 2001. The author addresses the influence of monetarism and the role of money in making monetary policy. The monetarist idea that monetary policy has primary responsibility for inflation is now conventional wisdom.
research.stlouisfed.org/publications/review/2001/09/01/does-money-matter
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