Do Foreign Yield Curves Predict U.S. Recessions and GDP Growth? / Rashad Ahmed, Menzie D. Chinn.

Format:

Book

Author/Creator:

Ahmed, Rashad.

Contributor:

National Bureau of Economic Research.

Chinn, Menzie D.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30737.

NBER working paper series no. w30737

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

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.

Notes:

Print version record

December 2022.