Machine learning model flags importance of yield curve for crisis prediction

financial-crisis

Credit growth and the slope of the yield curve are the leading predictors of financial crisis, according to a new paper published by the Bank of England.

“A flat or inverted yield curve is of most concern when nominal interest rates are low and credit growth is high,” say authors from the Bank of England, European Central Bank and the University of Bath.

They use a machine learning (ML) model to examine early warning signs, which the authors claim “generally outperforms” a baseline logistic

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