3 ms·
1. There already is an incredibly accurate predictor of recessions: the 10 year vs 2 year yield ratio. 2. The NBER defines a recession as “a significant declin
by fbonetti 8y ago
1. There already is an incredibly accurate predictor of recessions: the 10 year vs 2 year yield ratio.
2. The NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” It has nothing to do with the stock market.
- nickles 8y ago> There already is an incredibly accurate predictor of recessions: the 10 year vs 2 year yield ratio. This is not quite true. 2s10s curve inversion is commonly discussed, but 3m UST bill vs 10y UST note has far greater predictive power [0] -- and this indicator does not exist for all large economies. BoJ and ECB factor in curve inversions already, which diminishes their predictive power. Additionally, some have argued that the US tax policy changes have diminished the signal from the curve (companies repatriating cash tend to hold it in short dated tenors, making the curve steeper than it would otherwise be). Finally, there's argument over whether yield curve inversions are causative or indicative of recession in the US. [0] https://www.frbsf.org/economic-research/publications/economic-letter/2018/august/information-in-yield-curve-about-future-recessions/ https://www.frbsf.org/economic-research/publications/economi...