Download or read book The Yield Curve's Predictive Power on U.S. Recessions written by John William Lahman and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A negative-sloped Treasury curve is often cited in financial news articles and by Federal Reserve economists as a predictor of recessions. This report reviews previously published research examining the reliability of yield curves predicting recessions. Findings show that the yield curve inverts two or more quarters before recessions, with short-term interest rates rising above long-term interest rates. Probit regression has proven a reliable method for generating estimated probabilities of future recessions that, in turn, are useful for both monetary policy and asset allocation decision-making.