Yield curve models overstate chances of US recession – ECB research

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The recent inversion of the US yield curve is probably not a forecast of a recession, according to research published by the European Central Bank. 

In US yield curve inversion and financial market signals of recession, Johannes Gräb and Stephanie Titzck argue that standard models based on the yield curve are yielding distorted results. This, they say in research published in the ECB’s latest economic bulletin, is because those models fail to account for the effects of central bank bond

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