This study contributes to the relevant literature by providing an explanation on the reason and the economic conditions under which the spread proves to be such a powerful predictor of economic activity. For over two decades numerous studies have provided evidence on the predictive ability of...

Spread's predictive ability is reviewed by implementing a number of linear and probit models. We conduct a comparative analysis of the forecasting performance of various specifications by focusing on the last three major US economic slowdowns. The results indicate that although linear models are...