Following up on the examination of what the time period unfold predicts, right here’s the slope coefficients for the time period unfold, in regressions augmented with brief fee, from 1946-2023Q3 (GDP progress 1947-2024Q3).
Determine 1: Regression coefficient of GDP progress lead 4 quarters on 10yr-3mo unfold for subsamples. + (***) signifies significance at 11% (1%) msl, utilizing Newey-West normal errors. Supply: Writer’s calculations.
The general least-squares break regression end result (Bai-Perron) is:
If one runs a easy OLS regression on the final subsample (1984Q2-2023Q3), the adjusted-R2 is barely 0.04. The prediction seems to be like the next:
Determine 2: Yr-on-Yr GDP progress fee (blue) and predicted (tan). NBER outlined peak-to-trough recession dates shaded grey.
Clearly, the time period unfold Examine with the center interval recognized by the Bai-Perron technique:
Determine 3: Yr-on-Yr GDP progress fee (blue) and predicted (tan). NBER outlined peak-to-trough recession dates shaded grey.
These outcomes recommend that the time period unfold will not be at the moment an awesome predictor of progress (though it could change into so once more sooner or later).
