This paper examines the recession probability in the Eurozone within the next 12 months at the zero lower bound (ZLB) and explores two new perspectives: a revised measure of the traditional term spread and a modification to detect unstable dynamics driven by animal spirits. We find that the yield curve largely lost its forecasting ability at the ZLB. To remove the downward rigidity of short-term rates, we suggest a modified version of the term spread which uses a “shadow policy rate,” rather than the 3-month rate, as the front leg of the spread. We further show that a bivariate specification including both the current state of an indicator as well as its lagged deviation from its trend augments the predictive capability for most indicators significantly.

中文翻译：

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欧元区在零下限的衰退概率：期限利差和替代品兴起的挑战

本文研究了未来 12 个月欧元区在零下限 (ZLB) 下的衰退概率，并探讨了两个新观点：对传统期限利差的修正措施和检测由动物精神驱动的不稳定动态的修正。我们发现收益率曲线在 ZLB 处很大程度上失去了预测能力。为了消除短期利率向下的刚性，我们建议使用“影子政策利率”而不是 3 个月利率作为利差的前腿的期限利差的修改版本。我们进一步表明，包括指标的当前状态及其与趋势的滞后偏差在内的双变量规范显着增强了大多数指标的预测能力。