The Yield Curve as a Recession Leading Indicator. An Application for Gradient Boosting and Random Forest

Abstract

INCE the decade of the '80s, economic crises have been more recurrent and deeper. In this respect, researchers and practitioners have tried to understand, model, and even predict a recession differently. One popular forecasting tool suggested in the literature and followed by economists is the analysis of the slope of the yield curve or the term spread, i.e., the difference between longterm and short-term interest rates [1].