Dr Rosser Ask what the evidence is for term spreads to predict recessions, especially in Japan. Here is part of my answer:
Chinn and Kucko (2015) Examining the data for the period 1970-2013 yields the following results:
resource: Chinn and Kucko (2015).
This economist Articles on this topic are here.
Note that this specification includes three month yields in addition to the 10yr-3mo spread. For the simpler specification using only spreads, the results are essentially the same, except that the spreads are not statistically significant for Japan.
There are certainly many other studies on how the term spread predicts recession or growth in a group of countries; Haubrich (2020) Review some of these studies. However, recent studies often rely on panel analyses.see example Gabka and Vohal (2018) or Polio, Dreyman and Xia (2018)or Hasse and Laujani (2020), so we don’t know which specs are appropriate for a particular country. (and of course, Flour (2009) Research on emerging/developing countries is the most comprehensive. )
My cautionary tale for China, here.
A series of studies on the term spread by the Federal Reserve in June this year, Keeley (2022), Cornerstone (2022)and Ball and Mertens (2022).
Ahmed and Chinn (2022) Discuss 10yr-3mo term spreads, widened by foreign term spreads, as predictors.
