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The Predictive Content of the Interest Rate Term Spread for Future Economic Growth

By Michael Dotsey
Economic Quarterly
Summer 1998

The interest rate term spread contains useful information for predicting both economic activity and the probability of recessions. Further, the spread contains information not already included in past economic growth and past monetary policy. Nevertheless, the spread's forecasting performance, while still useful, has shown a noticeable deterioration in recent years.

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