Year: 2025
Type: article
Abstract: Using data from the Japanese government bonds and stock markets, this study examines the predictability of Japanese recessions based on a probit model with instrument variables. By decomposing the term spread into the expected short-term interest rate and the term premium, this study analyzes the relationship between the components of the term spread and recessions. The results show that the predictive power of the term spread for recessions has declined since 1999—when Japan began employing an unconventional monetary policy. Additionally, stock market capitalization relative to nominal GDP is a useful predictor of recessions.
Source: Economic Analysis Letters
DOI: 10.58567/eal04010004
Author: Hokuto Ishii
Institution: Chukyo University
Language: English
Domain: Social Sciences
Open Access status: hybrid
Funder: Florida International University
OpenAlex ID: W4407555432