The OG Yield Curve Whisperer : Planet Money A conversation with Campbell Harvey, whose 1986 thesis first explained how the yield curve could predict the direction of the economy.
NPR logo The OG Yield Curve Whisperer

The OG Yield Curve Whisperer

Campbell Harvey is a finance professor at Duke University. Back in the mid-1980s, when he was working on his PhD thesis, scholars were scrutinizing different markets for evidence that they could predict economic growth.

Harvey turned his own attention to the Treasury market — and his thesis would become the first formal explanation of the yield curve's predictive qualities. In his model, a yield curve that inverts for a quarter — that is, long-term interest rates are on average lower than short-term interest rates for a full quarter — predicts that a recession will begin within about a year.

At the time he was writing his thesis, this was true for every recession since the 1960s — and it has been true of every recession since his thesis was published.

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