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Yield Curve: Predicting Recessions

In: Economics Gone Astray

Author

Listed:
  • Erik Norland
  • Blu Putnam

Abstract

One of the rarely stated but nevertheless implied tenants of most schools of economic thought, including monetarism and Keynesianism, is that economic downturns are unpredictable and arrive randomly. In this chapter, we present evidence that this is not the case. Rather, the economy moves in cycles that are governed by a feedback loop in which monetary policy both drives changes in unemployment, credit spreads and equity index volatility and, in turn, reacts to those same three variables…

Suggested Citation

  • Erik Norland & Blu Putnam, 2019. "Yield Curve: Predicting Recessions," World Scientific Book Chapters, in: Economics Gone Astray, chapter 4, pages 45-57, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781944659592_0004
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    More about this item

    Keywords

    Economics; Macroeconomics; Monetary Policy; Fiscal Policy; Inflation; Risk Management; Federal Reserve; Quantitative Easing; Taylor Rule;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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