@article{tarta2025squeezing,
  title = {Squeezing the Curve: Unlocking Yield Information for Better Recession Forecasts in the CEE Region},
  author = {Gheorghe-Alexandru TARTA and Andrei-Costin NEACSU and George Alexandru NEACSU},
  year = 2025,
  url = {https://ibimapublishing.com/articles/JEERBE/2025/901911/},
  journal = {Journal of Eastern Europe Research in Business and Economics},
  volume = 2025,
  pages = 12,
  doi = 10.5171/2025.901911,
  abstract = {This study revisits the predictive capacity of the yield curve for recession signals in the industrial sectors of Central and Eastern Europe. The analysis considers the Czech Republic, Hungary, Poland and Romania as reference economies for the region. Yield curves, historically reliable indicators for downturns, have shown diminishing accuracy in recent years, according to the literature. The results highlight a notable weakening in the yield curve's ability to forecast industrial production across the CEE region, particularly in the post-2019 period. Only for Poland, the last years marked an improvement of the empirical relationship. For Romania, the Czech Republic and Hungary, yield curve efficacy significantly declined suggesting broader structural shifts. Further research was done with focus on Romania, which faced severe declines in industrial output during 2019-2024. By decomposing the yield curve into detailed indicators and employing Bayesian inference, this research extracts deeper insights from term structure data. Bayesian models incorporating persistence measures of curve inversion, even modelled through exponential function, provide moderate improvements, counterbalancing the recent decline in predictive power for Romania. This research points out the importance of complementary economic indicators, such as external demand, while advocating for advanced yield curve modelling methods to enhance forecast accuracy. The proposed procedure of modelling data and estimating the models yields significant performance differences compared to simple models. These results reveal a regional trend of decoupling between financial market signals and industrial sector dynamics, raising critical questions for policymakers and practitioners on the evolving role of yield curves in forecasting.},
  keywords = {industrial production recession, yield curve, early warning model, Bayesian inference},
  note = Article ID: 901911
}