The Aggregate Spread

Jeff Miller of “A Dash of Insight” has a fascinating post on the economic forecasting model of Robert F. Dieli. The model is based on what Dieli’s calls the “Aggregate Spread,” which is the unemployment rate plus the long-term Treasury yield minus the inflation rate and the Fed Funds rate. Any time the Aggregate Spread is less than 2% (or 200 basis points), it forecasts a recession in nine months.

Jeff and Bob have a few videos which track the model’s results over the decades. For now, the model says we’re safe from a recession.

Here I tried to reconstruct the model at the St. Louis Fed’s database.

Posted by Eddy Elfenbein on January 12th, 2013 at 6:11 pm

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