Figure 1: Forecasted probability of recession from 10yr-3mo term spread (blue), from 10yr-2yr term spread (tan), 10yr-3mo term spread augmented by FCI, foreign term spread (green). All models estimated over 1986M01-2022M11. NBER defined peak-to-trough recession dates shaded gray. Lilac shading denotes a hypothesized 2022H1 recession. Red dashed line at 50% probability. Source: author’s calculations, NBER.

Description of the probit models are contained in this post. Note the low estimated probabilities for recession ascribed to the period of 2022H1, which runs counter to the assertion of reader Steven Kopits. A recession sometime in 2023H2 is, on the other hand, not implausible.

Keep reading this article on Econbrowser Blog - James Hamilton & Menzie Chinn.

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