Template-Type: ReDIF-Article 1.0

Author-Name: Marcell Peter Granat
Author-Workplace-Name: Magyar Nemzeti Bank, John Von Neumann University, Eotvos Lorand University 
Author-Email: granatm@mnb.hu
Author-Person: 

Author-Name:  Gabor Neszveda 
Author-Workplace-Name: Magyar Nemzeti Bank, John Von Neumann University
Author-Email: neszvedag@mnb.hu 
Author-Person: 

Author-Name:  Dorottya Szabo  
Author-Workplace-Name: University of Lisbon
Author-Email: dorottya.szabo@aln.iseg.ulisboa.pt 
Author-Person: 

Title: An Empirical Analysis of the Predictive Power of European Yield Curves

Abstract: For various reasons, the yield curve of government bonds serves as a reliable
predictor of recessions in the US. This study provides an empirical analysis of
whether there is such a relationship in European countries. The methodological
framework employed in this study encompasses the utilisation of the Hodrick-
Prescott filter in conjunction with a probit model. The modelling procedure in the
literature is extended by optimally combining government bond maturity spreads
and examining whether the results are also robust for European yield curves. The
main finding of the paper is that in the US the spreads calculated from the yield of
7-year and 1-year government bonds are the best predictors, and they are similarly
suitable for predicting economic crises in half of the European countries as well.

Classification-JEL: G17, O11, O47
Keywords: yield curve, recession, probit model
Pages: 48-66
Volume: 22
Issue: 3
Year: 2023
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-22-3-st2-granat-neszveda-szabo.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:22:y:2023:i:3:p:48-66