The Term Structure as a Predictor of Real Economic Activity

Treball Final de Grau en Economia. Codi: EC1049. Curs acadèmic: 2020/2021The inversion of the yield curve is interpreted by financial markets as the prelude to a forthcoming economic recession. The predictive ability of this economic instrument to predict future growth rates of real economic activity, as well as economic recessions is examined. In addition, a selection of three countries belonging to the European Union, namely Germany, France and Spain, where we use a linear regression model and a probit model to test the predictive ability of this possible leading economic indicator is studied. Specific results for each country are obtained, concluding favourably in the analysis of Germany, and with less relevant results for France and Spain. However, given the simple application and interpretation of this tool, we consider it a relevant instrument to predict the economic future