Based on monthly data from 1970 to 2022 and the AUROC performance metric, we show that yield curve inversions generally predict recessions in the euro area. However, there are two important limitations. First, the forecasting capability of the yield curve has tended to weaken since the global...

Based on monthly data from 1970 to 2022 and the AUROC performance metric, we show that yield curve inversions generally predict recessions in the euro area. However, there are two important limitations. First, the forecasting capability of the yield curve has tended to weaken since the global...