Estrella and Mishkin (1996)developed a somewhat successful model to predict whether the economy is going into recession using what variable?

Question

Quizplus · Accepted Answer

Estrella and Mishkin (1996) used the spread between the 10-year U.S. Treasury Note and the 3-month T-Bill to predict whether the economy is going into recession. This variable is also known as the yield curve spread, and it reflects the market's expectations for future economic growth and inflation. A positive yield curve spread indicates that investors expect higher economic growth and inflation in the future, while a negative yield curve spread indicates the opposite. Estrella and Mishkin found that when the yield curve spread turns negative, it is a strong predictor of future recessions. Therefore, choice C is the correct answer.

Estrella and Mishkin (1996)developed a Somewhat Successful Model to Predict