In their paper “The Yield Curve as a Predictor of U.S. Recessions,” Arturo Estrella and Frederic S. Mishkin find a useful forecasting tool is the yield curve, more precisely the difference in interest rates between the three-month Treasury bill and the ten-year Treasury note. It is easy to use and performs noticeably better in predicting recessions two to six quarters in advance than other financial and macroeconomic indicators.
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