This is why the “Will there be a recession?” debate is so dumb. I don’t care whether the US experiences a recession; I’m simply not interested. The interesting question is whether the US will experiencethe sort of recession that we experienced in the past, where the unemployment rate...
Konstam adjusts the term spread by using the residual from the regression of the 10 year-3 month spread on the 3 month rate as a predictor of recessions. This, it’s asserted, removes the bias that comes about from the fact that the short rate has been bound in recent years. What is...
There is an additional problem (which is often ignored), namely that the HP filter is two-sided, so that running the filter up to the end point of data will tend to result in the trend being too close to the last data point (in our case, the output gap will be pulled to zero). ...
And although I think it unlikely we end up never recovering, the French experience should teach us some humility. Recall that in the 1960s most European economies had much lower unemployment than the US, typically around 2% or 3%. By the 1980s many were stuck with rates close t...